The Board of the Central Bank decided to keep the policy rate steady at 13.5% per annum at its meeting on January 23, 2025. This rate has remained unchanged since its last reduction on July 25, 2024, when the Central Bank lowered the policy rate by 0.5 percentage points from 14% to 13.5%.
Recent months have seen headline inflation decline, with the annual rate dropping to 9.8% in December 2024. This marks a stabilization in price growth, as three-quarters of goods and services in the consumer basket experienced slower price increases compared to 2023.
However, core inflation accelerated slightly in December, reaching 7.2%, driven by demand-side pressures. Elevated consumption and investment activity, fueled by rising wages and cross-border remittances, have sustained aggregate demand and contributed to inflationary pressures.
The Central Bank emphasized the need to maintain relatively tight monetary conditions to achieve a sustained decline in core inflation and inflation expectations. This approach aims to create the necessary conditions to meet the 5% inflation target in the medium term.
The effects of energy price liberalization in 2024 are expected to diminish in the coming quarters, significantly reducing headline inflation by mid-2025. Nonetheless, seasonal supply factors and external risks, such as potential increases in global food prices, could exert upward pressure on inflation.
The Central Bank projects GDP growth of around 6% in 2025, supported by high economic activity and increased private investment. The expansion of the supply of goods and services is expected to bolster growth while moderating inflationary pressures.
The real effective exchange rate, which appreciated briefly in late 2024, is anticipated to stabilize in 2025 as inflation continues to decline. Additionally, improvements in the current account balance and macroeconomic stability in trading partner countries are expected to support a balanced domestic currency market.
Money market interest rates and government bond yields indicate the restrictive stance of current monetary conditions. Real interest rates have encouraged household savings, while lending growth remains moderate.
The Central Bank highlighted its commitment to maintaining tight monetary conditions to ensure a stable decline in inflation. However, it signaled readiness to adjust the policy stance if stronger-than-expected inflationary pressures emerge in the coming quarters.
The next policy rate review meeting is scheduled for March 13, 2025.
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