4 May 2023 15:07

Uzbekistan Central Bank keeps key rate at 14%

TASHKENT. May 4 (Interfax) - The Board of the Central Bank of Uzbekistan decided at a meeting on Thursday to keep its key rate at 14% per annum, the press service of the Central Bank said.

The annual inflation rate in March and April continued to slow and reached 11.7% and 11%, respectively, due to seasonal factors and the high base effect of the previous year, the Central Bank said. Core inflation also showed a significant downward trend in March and slowed to 12.9% YoY, after reaching 13.8% in December 2022. Meanwhile, a higher level of core inflation compared to headline inflation indicates the persistence of certain inflationary risks, the regulator said.

The inflationary expectations of the population and businesses for the next 12 months returned to a downward trend to the level of 14.4% and 14.1%, respectively. At the same time, the median assessment of inflation expectations from the population decreased to 11.5%, and for businesses to 11.4%. The decline and the formation of expectations close to the long-term trend strengthens the prerequisites for maintaining the general trend of decelerating inflationary processes in the future.

"The tightening of global financial conditions has begun to manifest itself in increased volatility in global and regional financial markets. Despite the relatively quick response to emerging risks in the international banking system, tight lending conditions and uncertainty about future risks are predicted to remain until the end of the year," the Central Bank's press release said.

The Central Bank noted that the preliminary results of the first quarter of this year show that most of the indicators in the economy are compatible with the basic scenario of macroeconomic development. The updated forecasts raise the likelihood of higher real GDP growth in 2023 than previously forecast.

Meanwhile, the forecast for the inflation rate at the end of the year was kept in the range of 8.5-9.5%. "The dynamics of inflation expectations, moderately tight monetary conditions in the money market and the stabilization of the situation with the supply of basic goods increase confidence that inflation will form in the middle of this forecast corridor. The Central Bank will continue to carefully assess the impact of monetary conditions on demand, prices and inflation expectations. The decisions being made will be aimed at forming inflation inside the range of the forecast corridor," the press release says.

The next meeting of the Board of the Central Bank to consider the key rate is scheduled for June 15.

As reported, the Central Bank of Uzbekistan on March 17, 2022, against the backdrop of high uncertainty and tension in the world, raised its key rate to 17% from 14%. In June, it was decided to reduce it to 16%, and in July to 15%, after which the rate remained at this level until March 16, 2023, when it was reduced to 14%.

Earlier it was reported that the Central Bank of Uzbekistan forecast that the republic's GDP in 2023 will grow 4.5-5%. At the end of 2022, GDP had increased 5.7%.