Uzbekistan’s central bank on July 27 opted to keep its key rate unchanged at 14%, showing wariness over continuing pressure on prices.

The regulator said in a statement: "Despite the decline in inflation and inflation expectations, the main rate has been left unchanged in order to ensure the formation of inflation by the end of the year in the forecast range against the background of continuing price pressure associated with demand factors."

Trend indicators showed an increasing influence of the exchange rate factor on the inflation expectations of the population and business, the central bank also noted.

In June, Uzbek inflation slowed to 9% y/y with the exhaustion of high base effects from last year and the relative stabilisation of import and regulated prices.

Core inflation — which exclude the impact of administrative and seasonal factors on prices — declined more slowly than expected, to 11.3% in June.

The average annual inflation remained above the current inflation rate. That indicated the continued influence of fundamental demand factors on price formation.

Inflation expectations of the population and business in June decreased to 13.5%. The central bank highlighted an increase in the share of respondents who took note of a change in the exchange rate, wage hikes and benefits as the main causes of expectations.

Economic growth in 1H23 stood at 5.6%. The acceleration of credit growth and expanded budget expenditures, including hiked wages and benefits, supported economic activity. By the end of the year, economic growth will amount to 5−6% if the central bank forecast proves correct.

In addition, the national lender noted a 1.7-fold increase in lending to the population in June. In 1H23, the allocated volume of corporate loans amounted to UZS 116 trillion ($9.9bn), up 13% y/y.

The central bank left its end-of-year inflation forecast at 8.5−9%.