Uzbekistan’s Central Bank Sets New Inflation Target Amid Economic Uncertainty
The Central Bank of Uzbekistan is gearing up to unveil its new three-year monetary policy framework on October 31, with a renewed goal to achieve 5% inflation. Behzod Khamroev, a member of the Central Bank’s board, underscored the importance of addressing fundamental risks such as the budget deficit and preferential lending in order to maintain long-term price stability, rather than focusing solely on temporary factors like fuel or meat price fluctuations.
Speaking at a media briefing on October 18, Khamroev emphasized that while temporary price increases in certain market segments may occur due to factors like fuel or meat price hikes, these issues are expected to resolve as market supply stabilizes. However, he highlighted that addressing fundamental risks like the budget deficit, which is projected to be 4% this year and decrease to 3% or lower next year, is crucial for long-term price stability. Additionally, reducing preferential lending and transitioning towards market-based crediting are essential steps to combat inflation in the long run.
The Central Bank’s upcoming board meeting, originally scheduled for October 24, has been postponed to October 31 to allow for updated economic forecasts and macroeconomic indicators for the third quarter of 2024. During this meeting, the Central Bank plans to announce its monetary policy guidance and provide a clearer timeline for achieving the 5% inflation target.
Economic analyst Otabek Bakirov suggested that inflation concerns likely prompted the meeting’s delay, pointing to rising fuel prices and public unease ahead of the heating season. He noted that increased gas tariffs were already impacting consumers and that additional time was needed to assess inflation dynamics before finalizing decisions.
In a separate development, Uzbekistan’s President convened a meeting on October 17 to discuss macroeconomic indicators and the budget for the upcoming year. It was established that inflation should not exceed 7% in 2025 and should be maintained at 5-6% in 2026, with the ultimate aim of achieving a 5% inflation rate by 2027.
The Central Bank’s October 2023 base scenario initially projected that the 5% inflation target would be reached by the second half of 2025. However, under an alternative scenario, this target might be delayed until the end of 2026. As Uzbekistan navigates economic challenges and strives for price stability, the Central Bank’s upcoming monetary policy framework announcement will be eagerly awaited by stakeholders and analysts alike.
