Central Bank targets price stability with 14% base rate adjustment

During its March 20 meeting, the Central Bank of Uzbekistan decided to increase the base interest rate by 0.5 percentage points, setting it at 14% annually. This decision was announced in a statement issued by the Central Bank.

"This measure was taken in response to persistent inflationary pressures, steady growth in demand, and rising inflation expectations. The aim is to mitigate upcoming inflation risks, stabilize inflationary expectations, and create favorable conditions for achieving the 5% inflation target in the medium term," the statement highlighted.

Since the start of 2025, a slight increase in overall inflation has been observed, with an annual rate of 10.1% recorded by the end of February. This rise was attributed to price increases in various goods and services, including fuel, utilities, transportation, education, and healthcare. These factors have also influenced inflation expectations, which reached 15.3% among the public and 13.8% among business entities in February.

Additionally, high service-sector inflation in recent months has been linked to factors such as rising cross-border remittances and increased consumer credit activity. This has been reflected in the dynamics of retail trade turnover and revenue from paid services.

The real effective exchange rate has shown a declining trend since the start of the year due to the strengthening of currencies in key trading partner countries, aligning with its medium-term trend. To stabilize inflationary processes and balance supply and demand, tighter monetary policies have become necessary.

Considering these factors, the Central Bank has set the annual base rate at 14%, emphasizing its commitment to maintaining price stability in the medium term. The statement noted that stricter monetary conditions would help balance demand and curb inflationary pressures, potentially reducing overall inflation to 7-8% by the end of the year.

Looking ahead, the Central Bank aims to achieve the 5% inflation target in the medium term by maintaining sufficiently strict monetary conditions. If inflationary pressures and demand exceed expectations in the coming quarters, further tightening of monetary policies may be considered.

The next Central Bank meeting to review the base rate is scheduled for April 24, 2025.