The Central Bank of Uzbekistan (CBU) on January 25 announced its decision to maintain its policy rate at 14%, amidst stable economic growth and inflationary trends.

The regulator said it was managing ongoing strong demand within the economy as it sought to guide annual inflation towards its target of 5%.

Current forecasts predict headline inflation will fall between 8-9% by year-end, with recent data showing a consistent rate of 8.8%. The CBU attributed this partly to slight increases in service sector inflation, indicating potential demand-side inflationary pressures.

Economic growth, primarily driven by significant investments in fixed assets, has been accelerating, reaching a rate of 6%. Growth is also supported by rising loans, fiscal incentives, and remittances.

Globally, inflation is expected to decline due to tighter financial conditions and shifts in labour and commodity markets. The CBU does not anticipate significant pressure on the Uzbekistani som’s (UZS’) real exchange rate in the near future.

The CBU also observed increased activity in the money market, with conditions set to keep short-term interest rates within the targeted corridor throughout the year. With high real interest rates on national currency deposits, a rise in bank deposits is expected.

For 2024, the CBU also projects core inflation at around 7-8%.

The CBU said it was also focused on mitigating effects of recent changes in regulated prices and tax adjustments. External risks, it said, included global economic fragmentation and persistent high inflation.