Tashkent, Uzbekistan (UzDaily.uz) — The Central Bank of Uzbekistan sees scope for gradually lowering its key policy rate below 10% in 2027–2029 if inflation sustainably slows to the target of 5%.
The possibility was outlined on 4 November by Nodirbek Achilov, Deputy Chairman of the Central Bank, at a press conference on the policy rate decision and the regulator’s main monetary policy directions for the next three years.
“If we reach the final conclusion that inflation has fallen to the target level and inflation expectations continue to decline, there may be an opportunity to reduce the policy rate to a single-digit level within the monetary policy framework,” Achilov said.
The regulator has no pre-approved schedule for rate cuts. According to the deputy chairman, decisions to ease monetary policy will depend on actual inflation trends, inflation expectations among households and businesses, and assessments of economic risks.
The Central Bank’s baseline scenario projects that inflation will approach the 5% target in the second half of 2027 and remain around that level in 2028–2029. Core inflation, which stood at 5.5% in September, is forecast to slow to 4–5% in 2027 and then to around 4%.
As prices stabilise, the regulator expects to gradually shift from tight monetary conditions to neutral ones. Preliminary Central Bank calculations indicate a real interest rate range of 4–5%.
Achilov stressed that real interest rates should remain positive, as this supports the attractiveness of savings in the national currency and restrains excessive growth in consumer demand.
At its 4 November meeting, the Central Bank Board considered two options: keeping the policy rate at 14% or lowering it to 13.5%. The case for a rate cut was supported by declining inflation expectations and stabilisation in core inflation.
In September, inflation expectations for the next 12 months fell to 8.7% among households and 9.2% among businesses. The deputy chairman also pointed to the positive performance of the soum and other macroeconomic factors.
However, Achilov said the possibility of a rate cut required further discussion. “The option of keeping the policy rate at 14% received more votes from members of the Board,” he said.
The Central Bank attributes its decision to maintain tight monetary conditions to strong domestic demand and external inflation risks. Annual inflation accelerated to 6.4% in September from 6.2% in August, driven by higher prices for certain food products, fuel and services. Inflation in the services sector reached 7%.
The regulator is also taking into account possible fluctuations in global food and energy prices, as well as secondary effects from increases in regulated prices.
Under its main monetary policy guidelines for 2027–2029, the Central Bank plans to review its interest rate corridor. The corridor currently stands at plus or minus two percentage points around the policy rate, ranging from 12% to 16%.
As the regulator moves towards rate cuts, the existing corridor could prove too wide. The Central Bank is therefore considering narrowing it gradually. It expects improvements to its operational framework to help transmit changes in the policy rate more quickly to money and financial markets.
The policy rate has remained at 14% since March 2025, when the Central Bank raised it from 13.5%.
