BAKU, Azerbaijan, Nov. 20
By Fakhri Vakilov-Trend:
Uzbekistan’s Central Bank will switch to phased inflation targeting from January 1, 2020, the benchmark will be 10 percent in 2021 and 5 percent in 2023, as follows from the decree of the country's president Shavkat Mirziyoyev, Trend reports citing Uzbekistan’s information legal portal “Norma".
“From January 1, 2020, Uzbekistan’s Central Bank will ensure a phased transfer of monetary policy mechanisms to the inflation targeting regime with a goal of reducing inflation to 10 percent in 2021 and a permanent inflation target of 5 percent in 2023,” read the message.
Targeting is introduced in order to curb inflationary processes and to combine the actions of all government bodies to create market conditions for the formation of stable low prices in the economy.
In accordance with the document, in order to introduce the inflation targeting regime since 2020, the Central Bank has been instructed to take measures to bring the monetary policy instruments, mechanisms and procedures in line with the standards of the inflation targeting regime. This shall be achieved by introducing market instruments for influencing money market interest rates, including securities of the Central Bank, overnight deposits, regular deposit auctions, credit auctions and overnight loans secured by government securities and foreign currency until January 1, 2020.
Moreover, during 2020 Central Bank should introduce derivative instruments for managing interest and currency risks (swaps, options, futures) and gradually strengthen the role of commercial banks in the formation of the exchange rate. Within a month, the mechanism of the interest rate corridor of the main rate is expected to conduct a flexible interest rate policy with regular Central Bank interventions in the interbank money market.
Furthermore, until April 1, 2020, Central Bank should introduce, within a two-month period, a system of macroeconomic analysis and forecasting in accordance with international best practice, providing for the development of econometric modeling tools with the technical assistance of international financial institutions as well as modern principles of communication policy, which provides for timely coverage by the Central Bank of the current situation in the economy and key factors of inflationary processes and monetary policy measures.
Central Bank should also conduct regular studies of inflation factors and inflation expectations and of foreign best practices with the assistance of technical assistance from international financial institutions and central banks of other countries.
The fact that the Central Bank can move to inflation targeting in the 4Q2019 was announced back in September 2019.
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