At the meeting of the Central Bank Board on October 26, 2023, a decision was made to keep the interest rate unchanged at 14% per annum.
“Inflationary processes and expectations in the economy, after the decline in the first half of the year, accelerated slightly.
The current level of the main rate will serve to ensure the necessary monetary and credit conditions for the formation of inflation within the forecast indicators until the end of the year,” said the official release of the Central Bank.
Core inflation decreased from the beginning of the year and amounted to 10.3% in September. Despite this downward trend, a significant gap with overall inflation remains. This indicates a high increase in the prices of the stable components of inflation, requiring the provision of relatively tight monetary and credit conditions in the economy.
Household and business inflation expectations for the next 12 months fell to 13.5% and 14.2%, respectively, after rising in August. Expectations in the economy remain highly sensitive to short-term shocks.
According to the Central Bank, uncertainties remain regarding the duration of global inflationary processes. The situation in the current dynamics of the inflation rate and exchange rates in the main trading partners is increasing the pressure on strengthening the real effective exchange rate of the soum.
Positive trends are observed in the real sector of the economy, as of the end of September this year, the GDP increased by 5.8% compared to the corresponding period of 2022.
The high rate of economic growth was ensured due to the increase in consumer spending under the influence of fiscal stimulus and a significant increase in the volume of decentralized investments.
Relatively strict monetary and credit conditions serve to ensure the optimal growth rates of loans allocated to the economy. In addition, the high growth rates in retail loans observed in recent months are being balanced by the application of macroprudential measures, and additional measures may be applied in the future if necessary.
Positive real interest rates ensure high activity in the retail segment of the deposit market. In September, the weighted average interest rate on time deposits of the population in national currency was 21.1%, and as of October 1, the annual growth of the balance of time deposits was 47.1%, including the growth of time deposits of individuals was 52.3%.
According to updated forecasts based on the balance of inflation-increasing and decreasing factors, inflation is expected to be formed within the forecast corridor at the end of this year.
Inflationary factors such as seasonal food price increases and the primary and secondary effects of changes in regulated prices on headline inflation remain.
The Central Bank assesses the effects of monetary and credit conditions on aggregate demand, prices, and inflationary expectations, and focuses all monetary and credit instruments on ensuring the formation of inflation within the current year's forecast and achieving target indicators in the medium term.
The next meeting of the CB Board to review the base rate is scheduled for December 14, 2023.
