Uzbek Central Bank again maintains main rate at 14%

TASHKENT. March 14 (Interfax) - The Board of the Central Bank of Uzbekistan decided to maintain its main rate at 14% per annum at a meeting on Thursday, the press service of the Central Bank said.

"The Board of the Central Bank, taking into account the remaining uncertainties in the economy in terms of achieving a balance between supply and demand, as well as pro-inflationary expectations, has decided to leave the main rate unchanged in order to ensure the necessary monetary conditions to reduce inflation to close to the 5% target," the statement says.

Inflation has decreased since the beginning of the year, reaching 8.3% in February, the regulator said. However, in recent months, amid growing demand and increases in a number of regulated prices, service sector inflation has accelerated. In addition, the inflationary expectations of the public and business remain practically unchanged at a high level. It is expected that by the end of this year the inflation rate will be within 8-9% of the forecast range. During the forecast period, uncertainty remains regarding changes in regulated prices and their impact on inflation expectations.

The statement notes that economic growth indicators for the first quarter will be relatively high, while in subsequent quarters, expectations that indicators will be in the range of the basic forecast level of 5.5-6% are increasing.

"High budget expenditures last year and at the beginning of this year will become one of the main drivers supporting overall consumer activity in the coming quarters. Meanwhile, cross-border remittances as part of last year's indicators and the current growth rate of the public's real incomes will not create additional pro-inflationary pressure on future consumer demand," the press release said.

The Central Bank said that high growth in imports of machinery and equipment, energy resources and petroleum products, and ferrous metals is continuing, which, on the one hand, creates the basis for a future increase in production volumes, and on the other, also implies the preservation of the trade balance deficit. Achieving balance in the current account balance will depend on compliance with established budget discipline, foreign investment flows and the effectiveness of structural reforms aimed at developing the export potential of the economy.

"The Central Bank will continue to implement a consistent monetary policy aimed at achieving an inflation target of 5%. Meanwhile, special attention will be paid to the balance of supply and demand in the economy, inflation expectations and the dynamics of regulated prices," the statement says.

The next meeting of the board of the Central Bank to discuss the main rate is scheduled for April 25, 2024.

The Central Bank of Uzbekistan, amid high uncertainty and worldwide tension, increased the main rate in March of 2022 from 14% straight to 17%. It was reduced to 16% in June 2022, and to 15% in July. The rate was reduced again to 14% as of March 16, 2023.