Central bank maintains the key rate

The Central Bank has decided to keep the key interest rate unchanged at 13.5 percent per annum, as announced today, October 31.

This decision reflects ongoing inflationary pressures driven by high consumption and investment activity, along with fluctuations in the supply of certain goods and services. To stabilize inflation and achieve a medium-term target of 5 percent, the Central Bank emphasized the necessity of maintaining relatively strict monetary and credit conditions.

According to recent reports, overall inflation in September 2024 stood at 10.5 percent annually, unchanged throughout the third quarter. Basic inflation was recorded at 7.1 percent in September, influenced by elevated consumer demand, the liberalization of fuel prices, and rising prices for specific food products and services.

While the average prices of fruits and vegetables have been declining—contributing to a reduction in overall inflation—October's weekly observations indicate stable consumer goods prices, with monthly changes lower than the same period last year.

However, a notable disparity exists between inflation expectations among the population and entrepreneurs and the actual and projected inflation rates. A September survey revealed inflation expectations of 13.3 percent among the public and 12.6 percent among entrepreneurs.

For the last quarter of 2024, the Central Bank anticipates a slight decrease in inflationary processes due to stringent monetary conditions, predicting overall inflation to be around 9.5 percent by year-end.

From January to September 2024, Uzbekistan's economy experienced real GDP growth of 6.6 percent, driven by positive growth dynamics across all main sectors. High investment activity has been a key factor supporting this economic growth.

Moreover, cross-border remittances have risen at a faster rate than last year, bolstering household incomes. Increases in average wages and real incomes are further stimulating consumer activity, especially within the services and retail sectors.

Based on current economic trends, real GDP growth for 2024 is projected to be between 6.0 and 6.5 percent.

The money market interest rates and government bond yields indicate relatively tight monetary conditions in the economy. High real interest rates are encouraging savings among the population, while moderated credit investment growth and a rapid increase in deposits are expected to help balance aggregate demand and mitigate inflationary impacts.

Nonetheless, potential risks remain concerning short-term price and supply fluctuations of energy resources, disruptions in the supply chain of certain goods, and the persistence of high service prices, which could exert upward pressure on inflation.

The Central Bank is committed to implementing a monetary policy focused on reaching the 5 percent inflation target, while also considering the balance of supply and demand, inflationary expectations, and the pace of structural reforms in the economy.

The next review of the key rate by the Central Bank is scheduled for December 12, 2024.