Central Bank of Uzbekistan kept refinancing rate unmchanged

Business Materials 8 February 2018 12:13 (UTC +04:00)

Baku, Azerbaijan, Feb. 8

By Nigar Guliyeva – Trend:

The Board of the Central Bank of Uzbekistan decided to keep the refinancing rate at 14 percent per annum, the Central Bank said in a message on Feb.8.

Despite the continuation of the tight monetary policy and minimizing the impact of monetary factors, there was recorded an increased level of inflationary pressure in the economy in the fourth quarter of 2017, the Central Bank said.

The survey conducted by the Central Bank in January 2018 among the population and business entities showed a certain level of inflationary expectations in the economy.

"Under these conditions, the tight monetary policy course will be continued in 2018, aimed at ensuring price stability by minimizing the impact of monetary factors of the inflation," the Central Bank noted.

Furthermore, the Central Bank stressed that in the current realities, the task of curbing the growth of the price level requires focusing the main efforts to minimize the risks associated with non-monetary prerequisites.

Given the significant potential of the impact of budgetary operations on liquidity in the banking system and the money supply, the effectiveness of monetary policy is largely determined by the coordination of monetary and fiscal policies, the report says.

Future risks are associated with the use of funds accumulated in previous periods at the budgetary and off-budget accounts against the backdrop of intensification of measures to implement social and economic development programs of the regions.

In addition, a certain inflationary pressure in the economy will be exerted by the ongoing process of adjusting domestic prices under the impact of price liberalization and foreign trade conditions, the Central Bank said.

Furthermore, the outrunning growth rates of construction and investment in the economy over the production of building materials may, in addition to directly influencing the growth of prices, indirectly effect through increasing the cost of goods as a result of increased investment costs.

The excessive increase in the refinancing rate under conditions of the prevailing impact of fiscal and external factors in the dynamics of the money supply may not yield the expected results, while at the same time adversely affect business activity and investment processes in the real sector, the Central Bank noted.

However, in case of excess liquidity and excessive growth of its volumes in the banking system, as well as an increase in potential inflationary risks from monetary factors, the Central Bank will take additional measures to strengthen the anti-inflationary orientation of monetary policy.

In 2017, inflation in the consumer sector of Uzbekistan was at the level of 14.4 percent. In 2017, prices for food products went up by 15.9 percent, non-food products - 16.1 percent and services - 8.6 percent.

According to the IMF, inflation will be at the level of 14.3 percent in Uzbekistan in 2018. In turn, the Central Bank of Uzbekistan predicts inflation in the range of 11.5 - 13.5 percent.