Central Bank of Uzbekistan again holds policy rate at 14%
TASHKENT. Dec 14 (Interfax) - The Central Bank of Uzbekistan on Thursday decided to keep its key policy rate unchanged at 14% per annum, the regulator said in a press release.
"Maintaining a constant base rate while inflation slows will give rise to moderate real interest rates in the money market. When balancing the pace of lending, it will preserve current trends in savings activity, and will also broaden the scope for using internal financial resources as the cost of external financing rises," it said.
Annual inflation fell to 8.8% in October-November from a high base last year and lower contribution from rising import prices, the not fully manifested impact of energy tariff hikes for companies and the influence of relatively tight monetary conditions.
According to the baseline scenario, the inflation rate in 2024 is expected to be between 8-9%. In the coming quarters, external pro-inflationary risks may still emerge against the backdrop of non-market restrictions and fragmentation of international trade, as well as the consequences of the next anticipated regulated price adjustment.
The inflation expectations of households and businesses are still above actual inflation at 13-14%.
"The slower suppression of global inflation processes, volatile in global economic growth expectations and international commodity market prices strengthen the case for a tight external financial environment to persist in the coming quarters, in particular the terms of financing from external resources," the press release says.
Economic activity is supported mostly by strong aggregate consumer demand and higher private investment. Consumer demand is fueled by increased government spending and retail lending. The services sector, which accounts for about half of GDP growth, remains the driver of economic growth. The positive trends for wages and real incomes growth will support consumer activity going forward.
"These factors point to ongoing risks associated with ensuring the sustainability of the downward inflationary trend. In such conditions, the Central Bank has decided to continue with a relatively tight monetary policy to achieve the inflation target," the regulator said.
The Central Bank decided in March 2022 to hike the policy rate from 14% to 17% per annum. The rate was lowered 1 pp to 16% per annum in June and another 1 pp to 15% in July and held at that level until May 17 this year when it was lowered to 14% amid positive economic tendencies.
The next policy rate meeting is scheduled for January 25.