The Central Bank of Uzbekistan on 25 July lowered the policy rate by 0.5 percentage points to 13.5%, the bank’s press service said. This decision marks the first time since June 2017 that the policy rate is below 14%.
The previous time the rate was changed in March 2023, when it went down to 14% from 15%.
The rate is lowered taking into account the expected inflation trajectory and lower pro-inflationary risks, the regulator said.
“The downward trend in core inflation and inflation expectations dynamics indicate that the secondary effect of the increase in energy tariffs on inflation was lower than expected, which strengthens confidence in the formation of inflation at the lower bound of the forecast corridor at the year end,” the statement reads.
The headline inflation in June amounted to 10.6% year-over-year, with a substantial decline in the persistent inflation components as well as fruit and vegetable prices. The price dynamics in the external markets also continues having a downward impact on imported inflation.
Core inflation continued its downward trend, reaching 5.9% in June, a 2.6 p. p. decrease since the beginning of the year. This is attributed to the fact that the secondary effect of energy tariff changes was lower than expected, thus signalling the probability of a continuation of the downward trend in inflation in the future.
The Central Bank expects the headline inflation to be around 9% at the year end and approach the 5% target by the end of 2025.
In the second quarter of 2024, economic growth continued accelerating, with the economy growing by 6.4% in real terms in the first half of the year. Manufacturing, construction and services were the major drivers of economic growth.
Amid expected continuation of high investment and production activity in the second half of the year, the real GDP growth forecast has been revised up to 5.7%-6.2% by the end of the year.
Due to structural changes in the expenditures of households and business entities, aggregate consumer demand is projected to be somewhat moderate.
Export revenues and remittances are projected to grow higher than previously expected given strong economic growth in Uzbekistan’s major trading partners and favourable prices in the world markets.
In the second quarter of 2024, there was a considerable increase in foreign currency inflows through various channels, which contributed to the stabilisation of the soum exchange rate.
The next meeting of the Central Bank’s board to review the policy rate is scheduled for 12 September.
