Uzbekistan’s central bank left its refinancing rate steady at 16.0 percent but said a slight decrease in the rate was possible in the next monetary policy meetings.
The Central Bank of the Republic of Uzbekistan (CBU), which has maintained its rate since raising it in September 2018 due to high inflation, said the decision to maintain the rate today was to strengthen its confidence that inflation would decelerate along with persistent uncertainties over changes to regulated prices.
Uzbekistan’s inflation rate at the end of 2019 was 15.2 percent, near the upper boundary of CBU’s forecast corridor of 13.5 to 15.5 percent, with a rise in the second half of last year mainly caused by a liberalization of some regulated prices (an uptick fo 21.6 percent in prices) along with a fall in the exchange rate of the sum in August 2019, the bank said.
But in the fourth quarter of last year, the quarterly inflation rate slowed to 5.0 percent from 5.7 percent in the same 2018 period and CBU is forecasting inflation of 12.0 to 13.5 percent in 2020.
This forecast is based on the assumptions of a slower rise in food prices, an expansion of agricultural output, better supply of textiles and construction, moderate credit growth, the exhaustion of some of the inflationary impulses that arose last year along with a fiscal stance that should prevent excess demand, thus easing the upward pressure on inflation and pressure on the exchange rate.
Last year the sum lost 12.3 percent of its value against the U.S. dollar but this year the depreciation has slowed with sum trading at 9,550 today, down 0.5 percent since January 1.
Uzbekistan’s economy expanded last year by an estimated 5.5 to 5.6 percent and the central bank said conditions for this year, especially in the first half, remain favorable due to stimulating fiscal and credit policies and the positive outlook for major export commodities.