Uzbekistan's Central Bank holds key rate at 14%

TASHKENT. Dec 11 (Interfax) - The Central Bank of Uzbekistan's board decided at a meeting on Thursday to keep the key rate at 14% per annum.

"Relatively tight monetary conditions are leading to the gradual slowdown of inflationary pressures and inflation expectations. At the same time, a certain degree of inflationary risks persists in the economy due to stable aggregate consumer demand, supply factors, and high price dynamics in the services sector. This decision is aimed at achieving a stable disinflationary trajectory in the medium term," the regulator said in a press release.

The downward trend of inflation continued in November, reaching 7.5% annually, it said. This was primarily driven by the slowdown in core inflation due to tight monetary conditions and the relative appreciation of the exchange rate.

"Headline inflation at the end of 2025 is expected to be around 7.3%. Appreciation of the national currency at a higher rate than previously estimated led to a stronger-than-expected disinflationary impact from import inflation and inflation expectations, necessitating a downward revision of the inflation forecast," the regulator said.

According to the updated forecasts, the inflation rate for the end of 2026 is expected to be around 6.5%.

Economic activity remains high, with growth rates forming above their potential. This is evidenced by increased demand in labor market, rising revenues from trade and paid services, and a growing volume of interbank transactions. Against the backdrop of current economic and investment activity, the economic growth rate for the end of the year is expected to form around 7%-7.5%.

Favorable external conditions will help the real effective exchange rate form close to its long-term equilibrium trend.

The global economy is growing at a higher-than-expected pace. At the same time, prices in world commodity markets remain high. This will continue to support the country's export revenues in the future.

With relatively stable nominal interest rates in the domestic financial market, the decline in inflation and inflation expectations is driving real interest rates higher, stimulating savings in the national currency. This is evidenced by the high growth rates in the volume of time deposits.

At the same time, the high growth rate of retail lending due to widening of financial inclusion reflects strong consumer activity. This will support aggregate demand, potentially intensifying upward pressure on inflation in the future.

"The Central Bank will ensure the sufficient restrictiveness of monetary conditions to achieve the inflation target of 5%. In this regard, monetary conditions may be revised depending on the inflation dynamic and the balance of inflationary risks," the Central Bank said.

The Central Bank is due to hold its next key rate meeting on January 28.

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

The Central Bank in its May report on monetary policy for the first quarter worsened its inflation forecasts for 2025 to 8% and 2026 to 5%-6%. It said pro-inflationary factors included higher investment activity and the May increase in electricity and natural gas tariffs.