The BOD of the Central Bank at its meeting today took a decision to keep the interest rate at 14% per annum. According to the Bank, in recent months, the trends of economic activity and consumer demand, as well as the trend of growth of core inflation, have indicated to the ongoing inflationary pressure onto the economy.
This pressure is leading to the formation of inflation above the forecast trajectory, despite a slight decrease in overall inflation in May. In order to reduce the secondary effects of rising gas and electricity prices on inflation processes and the transition of overall inflation to a stable downward trend, the key rate was kept at the current level, the Central Bank underscored.
In May, annual inflation fell to 8.7%, mainly due to the exhaustion of the effect of increasing energy prices in 2024. However, inflation expectations of the population and businesses remain higher than the actual inflation rate.
The growth of core inflation reached 8.5% per annum. In the backdrop of high aggregate demand, the economy is experiencing secondary effects from the last increase in energy prices (May 2025), which indicates more prolonged inflationary pressure.
Pressure from demand side and budget expenditures is still present
The Central Bank underscored that high economic activity in January-May was one of the main factors in the growth of the aggregate demand. This is reflected in an increase in income from trade, services, interbank transactions, real estate transactions and money transfers from abroad.
Lending rates are also still high and government spending is growing, which further stimulates demand - and therefore pressure on prices.
External environment remains unstable
The Central Bank expects that tight monetary conditions in many countries will persist for a long time due to global economic uncertainty. At the same time, the growth in world prices for certain food products may create additional pressure on domestic prices in Uzbekistan.
Meanwhile, maintaining high exchange prices for traditional export goods and strengthening exchange rates in trading partner countries support export revenues and cross-border transfers. This, in turn, along with the influx of foreign investment, ensuring a stable formation of supply in the domestic foreign exchange market, will help reduce pressure on inflation from the exchange rate in the coming months.
The Central Bank believes that maintaining the current rate will ensure moderate growth in lending, high growth rates of deposits and containment of inflation through monetary policy.
Taking these factors into account and to ensure price stability in the medium term, the Central Bank kept the rate unchanged at 14% per annum.
The regulator will ensure sufficient tightness of monetary conditions to achieve the 5% inflation target in the medium term.
"If there are grounds and a likelihood that inflationary pressure from aggregate demand and secondary effects in the economy in the coming months will be higher than expected, the degree of tightness of monetary conditions may be revised," the statement said.
The next meeting of the Central Bank to review the rate is scheduled for July 24.
