BAKU, Azerbaijan, August 14. Uzbekistan's
central bank is likely to keep interest rates elevated for longer
than previously expected as persistent inflation risks, suspended
gold exports and external imbalances strengthen the case for
maintaining a tight monetary policy stance.
This follows an analysis by ING Think after the Central Bank of
Uzbekistan (CBU) left its key policy rate unchanged at 14% and
adopted a more hawkish tone in its latest policy guidance.
According to ING, the CBU has effectively ruled out the prospect
of a near-term rate cut by removing previous language that had
suggested conditions could emerge for gradual monetary easing.
Instead, the regulator is emphasizing rising inflationary
pressures, stronger domestic demand and external risks.
ING noted that the central bank appears committed to maintaining
one of the highest real interest rates in the region to encourage
domestic savings, support the attractiveness of soum-denominated
assets and reinforce stability in the foreign exchange market.
The report also highlighted that Uzbekistan's gold exports have
remained largely on hold since May following a brief recovery in
April. While higher global gold prices could eventually encourage
exports to resume, the prolonged pause is weighing on the country's
trade balance and increasing reliance on foreign portfolio inflows
to support the national currency.
According to ING, maintaining a stronger soum would help limit
imported inflation and support the CBU's long-term objective of
reducing inflation to 5%.
The bank no longer expects Uzbekistan to begin cutting interest
rates in September. However, it believes a cautious easing cycle
could still begin later this year if fiscal consolidation
continues, core inflation moderates and gold exports resume.
Trend's analysis
shows that the CBU is increasingly prioritizing macroeconomic and
currency stability over supporting credit growth. The combination
of persistent inflation risks, strong domestic demand and external
trade pressures has shifted the focus from preparing markets for
lower interest rates to preserving restrictive monetary
conditions.
Trend's calculations show that Uzbekistan's current policy rate
of 14% exceeds the CBU's year-end inflation forecast of 6.5% by 7.5
percentage points, leaving one of the highest positive real policy
rate margins in the region. Such a spread strengthens the appeal of
soum-denominated financial assets while helping contain inflation
expectations and support the exchange rate.
In Trend's
assessment, the suspension of gold exports has become an
increasingly important factor in Uzbekistan's monetary outlook.
With export revenues temporarily constrained and the trade deficit
remaining elevated, maintaining high real interest rates provides
an additional buffer for the foreign exchange market. Unless
inflation eases more decisively and gold shipments recover, the
central bank is likely to keep monetary policy tight well beyond
the summer, delaying the start of its easing cycle.
