Central Bank Raises Key Rate to 14% Due to Inflation Concerns
The Central Bank Raises Key Interest Rate to 14% Amid Inflationary Pressures
In response to sustained inflationary pressures, steady demand growth, and rising inflation expectations, the Central Bank’s Board has decided to increase the key interest rate by 0.5 percentage points, setting it at 14% per annum. This adjustment aims to address anticipated inflationary risks in the coming months, curb inflation expectations, and create conditions sufficient to achieve the medium-term inflation target of 5%.
Since the start of 2025, overall inflation has seen a slight uptick, reaching an annual rate of 10.1% by the end of February. Factors contributing to this trend include price increases in goods and services such as fuel, utility rates, transportation, education, and medical services.
Elevated service-sector inflation has been attributed to robust aggregate demand factors within the economy, including growing cross-border money transfers and increased lending to the population. The strengthening of currencies of key trading partners has also led to a downward trend in the real effective exchange rate.
In order to stabilize inflationary processes in the economy and maintain a balance between aggregate demand and supply, a tighter monetary policy stance was deemed necessary. Therefore, the Central Bank’s decision to raise the key rate to 14% annually is aimed at ensuring price stability over the medium term.
The Central Bank remains committed to maintaining sufficiently stringent monetary conditions to bring inflation down to its 5% target over the medium term. The next meeting of the Central Bank’s Board to review the key interest rate is scheduled for April 24, 2025.
Historically, the lowest rate was 9%, effective from January 2015 to May 2017, while the highest rate was recorded in 1995 at 300%. The Central Bank’s decision to raise the key interest rate reflects the current economic conditions and the need to address inflationary pressures in the market.
