Uzbekistan's Central Bank holds key rate at 14%

TASHKENT. April 24 (Interfax) - The Board of the Central Bank of Uzbekistan took the decision to keep the key rate at 14% at its meeting on Thursday.

"This decision will support a sustainable decline in inflation and inflation expectations, creating necessary conditions to achieve medium-term target of 5%," the Central Bank's press service said.

The bank reported that prices had begun to increase more rapidly since the beginning of the year, with inflation year-on-year at 10.3% in March. Core inflation also continued to accelerate, reaching 8.1% per annum.

The Central Bank said that the primary effect of 2024's fuel price liberalization would cease to be felt by the end of Q2 and would then help to reduce inflation. As conditions for international trade worsen, there is also an increased risk of consumer prices rising globally as well as production costs and external inflationary pressures growing.

"According to updated forecasts, headline inflation is expected to approach the upper bound of the forecast corridor, 7%-8%, by the end of 2025," the bank said in its message.

The bank also said that economic growth in Q1 had accelerated to 6.8% thanks to an increase in aggregate consumption and investment activity, while a significant growth in cross-border money transfers and faster lending rates sustain aggregate demand.

The bank expects GDP to continue growing thanks to high economic activity, achieving growth of roughly 6% in 2025.

The press release also said that the real effective exchange rate of the national currency, the sum, had remained within its medium-term trend since the beginning of the year as the currencies of Uzbekistan's major trading partners strengthened and the sum remained relatively stable against them.

"The Central Bank will continue to maintain sufficiently tight monetary conditions to ensure that inflation gradually declines to the 5% target level in the medium term," the message reads.

Monetary conditions could be reassessed based on inflation expectations and the next stage of fuel price liberalization in May.

The Board of the Central Bank will hold its next key rate meeting on June 12.

The rate has been at 14% since March 24, when it was raised 13.5%.