The Central Bank's board decided to maintain the key interest rate at 13.5% during the meeting on January 23. The regulator justified this decision by citing high inflation expectations among the people of Uzbekistan.
Economists note the mixed nature of inflationary factors. Overall inflation at the end of the year was 9.8%, which is slightly lower than in previous months. The price increase for three-quarters of goods and services in the consumer basket slowed down by 2023, indicating a continued stabilization of prices.
On the other hand, core inflation rose to 7.2% in December due to the rising costs of manufactured goods and services. This indicates the presence of pro-inflationary factors from both the supply side and the aggregate demand side.
There has been an increase in inflation forecasts among the population and businesses, which the Central Bank attributed, among other things, to seasonal supply factors. However, the weakening of their influence on inflation, combined with a "relatively tight" monetary policy, is expected to contribute to their reduction.
By the end of the second quarter, the primary effects caused by the increase in energy resource tariffs in May 2024 are expected to be exhausted. At the same time, a temporary rise in the overall inflation level is anticipated in April due to the postponement of the second phase of reforms by one month.
The level of secondary impact of energy tariffs on core inflation will be one of the main factors in determining future monetary policy. By the end of the year, the Central Bank expects overall inflation to be in the range of 7−8%.
The projected GDP growth rate due to the increase in private investments is around 6%. A high level of consumer activity driven by rising incomes will also support aggregate demand and economic development.
At the same time, this may accelerate the growth of core inflation in the coming months, according to the Central Bank. Experts also identified the risks of rising global prices for certain food products that Uzbekistan imports as a pro-inflationary factor.
The regulator noted the anticipated improvement in the current account balance, as well as expectations of macroeconomic stability in the countries that are Uzbekistan's main trading partners. This suggests an expectation of balanced trends in the currency market.
The Central Bank has maintained the medium-term inflation target level at 5%. It also considers the possibility of revising monetary conditions if pro-inflationary factors and demand pressures intensify.
Previously, Spot reported that the Central Bank restricted the active operations of 2 banks for failing to meet capital requirements.