Uzbekistan's Central Bank holds key rate at 14%

TASHKENT. Jan 28 (Interfax) - The Central Bank of Uzbekistan's board decided at a meeting on Wednesday to keep the key rate at 14% per annum.

The regulator said in a press release that economic activity developed at a higher-than-expected level in 2025, driven primarily by resilient aggregate demand factors. Inflation has continued on a downward trajectory, with price growth for goods slowing broadly.

"Meanwhile, the relatively elevated level of services inflation as a result of demand factors, as well as price increases for certain food items, poses specific risks to a sustained decline in headline inflation. Under these conditions, maintaining the current tight stance of monetary policy will help ensure that inflation continues along a stable downward path," the regulator said.

It may be possible to consider a reduction in the policy rate if inflation and inflation expectations continue to decline steadily in the coming quarters, it said.

According to the Central Bank's updated forecasts, inflation is expected to be around 6.5% by the end of 2026. High investment activity, fiscal spending and rising remittances will continue to support income growth and stimulate consumer demand this year as well.

Despite continued uncertainty in the external environment, overall impacts are expected to remain moderate. Inflation in major trading partner countries has shifted to a declining trend, while global economic growth has exceeded expectations.

High growth in precious metals prices is projected to continue to account for a significant share of export receipts and budget revenues.

In the domestic currency market, foreign currency supply supported by export revenue, external borrowing, and remittances contributed to a 6.9% appreciation of the sum, the national currency, in 2025. This helped reduce imported inflation pressures and the level of dollarization. In addition, it lowered external debt servicing costs. In the coming months, it is expected that external conditions will stay relatively favorable and the dynamics of the real effective exchange rate will form at a balanced level.

"Against the backdrop of current economic and investment activity, economic growth by year-end is expected to be around 6.5%-7%," the Central Bank said.

As excess liquidity in the banking system persists, liquidity absorption operations have intensified to ensure that money market rates remain close to the policy rate, at around 13.5%-13.8%. As a result, positive real interest rates continue to encourage savings in the national currency and remain a tightening factor for monetary conditions.

"Given strong aggregate demand factors, particularly fiscal stimulus and high growth in retail lending maintaining the policy rate at its current tight level will help contain inflationary risks," the regulator said.

The Central Bank's monetary policy will remain focused on reducing inflation to the 5% medium-term target, ensuring macroeconomic stability, and preserving the purchasing power of the population, it said.

The Central Bank is due to hold its next key rate meeting on March 18.

The rate has been 14% since March 24, 2025, when it was raised 13.5%.