Uzbekistan's Central Bank keeps discount rate at 14%

TASHKENT. Jan 25 (Interfax) - At a meeting held on Thursday, the Board of the Central Bank of Uzbekistan decided to keep its main rate unchanged at 14%, the Central bank's press service said.

"The main rate has been left unchanged, taking expectations into account that were formed under the influence of high demand dynamics in the economy. According to forecasts, inflation is expected to reach 8-9% by the end of the year," the report says.

The regulator says that, generally, the emergence and persistence of inflationary processes in the economy can be explained by the inability of some components of supply to fully adapt to conditions of high demand.

"High growth rates of investment in fixed assets played an important role in accelerating economic growth to 6% in 2023. Positive dynamics of loans to the economy, fiscal incentives and remittances also supported the dynamics of economic growth," the release said.

The Central Bank expects that global inflation will continue to slow this year under the influence of tight financial conditions, a balancing of labor markets and declining dynamics of world commodity prices. The scenario for the macroeconomic development of Uzbekistan this year will depend on external economic as well as macroeconomic stability factors such as the pace of structural reforms, budget discipline and the effectiveness of monetary policy.

"According to the updated forecasts of the main scenario, inflation in 2024 is expected to be 8-9%, with core inflation of about 7-8%," the report says.

Real GDP growth in 2024 is projected at 5.5-6%. The main factors of economic growth are, on the one hand, consumer demand, and on the other, an increase in the volume of foreign and domestic direct investment influenced by structural reforms.

The Central Bank says that the main external risks will be associated with increased global fragmentation and the longer-term persistence of increased inflation in the world.

On March 17, 2022, the Central Bank of Uzbekistan, amid high uncertainty and tension in the world, increased its main rate from 14% straight to 17%. In June 2022, it decided to reduce it to 16%, and in July, to 15%. On March 16, 2023, the rate was again reduced to 14%.

The next meeting of the board of the Central Bank of Uzbekistan is scheduled for March 14, 2024.

The official exchange rate as of January 25 is 12 thousand 412 soums/$1.