In Uzbekistan, the Central Bank has opted to maintain its main interest rate at 14% per annum following a meeting held on October 26. The decision to keep the rate steady was communicated by the central bank's press service.
The central bank based its decision on an assessment of inflationary trends and economic expectations, which, after a decline in the first half of the year, had shown some signs of acceleration. This acceleration was attributed to shifts in product supply and factors related to inflationary demand.
The current 14% key rate is intended to facilitate the necessary monetary and credit conditions to maintain inflation within forecasted parameters through the end of the year.
Over the course of the year, general inflation had been on a declining trajectory but increased to 9.2% in the last quarter. This rise in inflation can be attributed to a variety of factors, including an 11% increase in food prices and changes in regulated prices for fruits and vegetables, which contributed to the overall inflation.
However, core inflation has decreased from the beginning of the year, reaching 10.3% in September. Notably, consumers' and entrepreneurs' expectations for inflation over the next 12 months fell to 13.5% and 14.2%, respectively, after an uptick in August. These expectations within the economy remain highly sensitive to short-term shocks.
The central bank also acknowledged ongoing uncertainties with regard to global inflationary processes and noted that inflation rates in key trading partner countries, coupled with exchange rate dynamics, exerted pressure on the strengthening of the real effective exchange rate of the Uzbek soum.
Despite these economic challenges, positive real interest rates have continued to stimulate activity in the retail segment of the deposit market. In September, the weighted average interest rate on time deposits in the national currency stood at 21.1%, and as of October 1, there was a substantial 47.1% annual growth in the balance of time deposits, including a noteworthy 52.3% growth in individual time deposits.
This decision to maintain the key rate at 14% follows a previous meeting of the central bank board held on January 26, 2023, in which the key rate remained unchanged at 15%. Subsequently, on March 16, 2023, the main rate was reduced by 1% per annum, bringing it to its current level of 14% per annum. On September 14, the key rate was again left unchanged at 14%, as part of the central bank's efforts to navigate economic conditions and inflationary pressures.
Within the intricate tapestry of central bank interest rates among Uzbekistan's neighboring nations, a panorama of diversity unfolds. Kyrgyzstan maintains a relatively moderate rate of 13%, while Kazakhstan, known for its robust economy, holds its rate at a relatively higher 16%. On the other hand, Turkmenistan opts for a more conservative approach with a modest rate of 5%. Meanwhile, Tajikistan positions itself in the middle ground with a rate of 10%, reflecting its economic policies in the region.
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