Tashkent, Uzbekistan (UzDaily.com) — On 23 January 2025, the Board of the Central Bank of Uzbekistan decided to maintain the policy rate at 13.5% per annum.

The regulator noted that despite a general slowdown in inflation in recent months, the economy is experiencing the influence of divergent factors. Persistently high inflation expectations, despite the anticipated reduction in the impact of last year’s energy price liberalization over the coming quarters, necessitate the continuation of a tight monetary policy.

This decision is aimed at stabilizing core inflation and inflation expectations, as well as creating conditions to achieve the medium-term inflation target of 5%, the Central Bank emphasized.

Headline inflation has been on a downward trajectory since October 2024, reaching 9.8% year-on-year by December. This decline reflects price stabilization processes. By the end of the year, price growth for three-quarters of goods and services in the consumer basket had slowed compared to 2023.

At the same time, core inflation slightly accelerated in December, reaching 7.2%. High inflation in services and non-food goods indicates the presence of inflationary factors linked to both supply and increased aggregate demand.

Economic activity, including consumer and investment demand, remains high, a characteristic feature of 2023–2024. Significant wage growth and an increase in cross-border remittances in 2024 have boosted real incomes. This dynamic, combined with overall economic activity, exerts additional pressure on core inflation.

In November and December 2024, inflation expectations among households and businesses increased due to seasonal supply factors.

However, the further weakening of these factors, combined with tight monetary conditions and a stable macroeconomic environment, is expected to contribute to a reduction in inflation expectations.

According to updated forecasts, headline inflation is expected to reach 7–8% by the end of 2025. This decline will be driven by the fading of the initial effects of last year’s energy price liberalization, which is anticipated by the second quarter of 2025. However, any delay in implementing the next phase of reforms could lead to a temporary spike in inflation in April.

The impact of these changes on core inflation will be a key factor in adjusting monetary policy.

Economic growth in 2025 is projected at around 6%, supported by an increase in private investment. This will create conditions for the expansion of the supply of goods and services.

At the same time, risks of rising global food prices in the coming quarters could intensify inflationary pressures through imports.

At the end of 2024, a short-term strengthening of the real effective exchange rate was observed, driven by the depreciation of the currencies of certain trading partners and higher inflation in Uzbekistan relative to them. In the second half of 2025, the exchange rate is expected to return to its medium-term trajectory as inflation slows.

The improvement in the current account balance in 2024 and the stability of the macroeconomic environment in partner countries form expectations of a balanced domestic foreign exchange market in the medium term.

Current money market interest rates and yields on government securities indicate tight monetary conditions. Real interest rates encourage households to save.

Maintaining tight credit conditions will moderate credit growth and increase deposits, helping to balance aggregate demand and reduce monetary inflationary factors.

Considering the above, the Central Bank Board decided to maintain the policy rate at 13.5% per annum to ensure price stability in the medium term.

The Central Bank will continue adhering to a tight monetary policy to reduce inflation to the target level of 5%. Should inflationary pressures intensify, measures may be revised.

The next policy rate meeting is scheduled for 13 March 2025.