The Central Bank of Uzbekistan convened a routine board meeting, as reported by the press service of the regulatory body. At the meeting, the board resolved to maintain the main interest rate at its current level of 14%. This decision is aligned with the imperative to address the robust demand prevailing in the economy. It underscores the Central Bank's commitment to fostering a stable decline in inflation, with the target set at 5%.
Economic outlook and inflation projections
Projections indicate that inflation is anticipated to reach 8-9% by the close of the current year. The monetary conditions in place are meticulously crafted to facilitate a consistent reduction in inflation, aligning with the aforementioned 5% target.
Inflationary trends and economic dynamics
Despite recent efforts, overall inflation has lingered at 8.8%, with a slight acceleration observed in service-related inflation during the last quarter. This trend hints at the likelihood of intensified upward pressure stemming from demand-side dynamics on inflation.
Factors influencing inflation
The persistence of inflationary processes is attributed to the insufficient adaptability of certain supply components to the conditions of heightened demand. Concurrently, surveys reveal that perceived inflation and inflation expectations remain elevated, underscoring the prevailing challenges.
Economic growth and global context
A noteworthy 6% economic growth in 2023 was propelled by robust fixed investments, positive credit conditions, fiscal stimulus, and remittances. Globally, a deceleration in inflation is anticipated, influenced by tight financial conditions, balanced labor markets, and declining commodity prices.
Exchange rate and monetary operations
With an outlook on trading partner countries and structural liquidity in the banking system, it is anticipated that there will be no substantial pressure on the real effective exchange rate of the som in the coming months. An intensification of operations in the money market is evident, driven by the reduction of structural liquidity surplus.
Incentives for deposits and future projections
Under the influence of high positive real interest rates on deposits in the national currency, an upward trajectory in the growth of bank deposits is foreseen. The updated forecasts project general inflation in 2024 at 8-9%, with core inflation expected to hover around 7-8%.
Macroeconomic development and future decisions
The macroeconomic scenario in 2024 is contingent on both external and internal factors, including structural reforms, budget discipline, and the effectiveness of monetary policy. The Central Bank remains vigilant, taking measures to mitigate potential one-off impacts on domestic prices.
Future considerations
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