Upward pressures from strong economic activity and consumer demand on prices continued in the second quarter of current year. In addition, inflation began to decline starting from August as the effects of the previous year’s base faded. To ensure a slowdown in inflationary processes and maintain the downward trajectory of core inflation, the Board decided to keep the policy rate unchanged at 14 percent.
In August, headline inflation declined slightly compared to July, to 8.8 percent year-on-year. Due to the slowdown in food and non-food price growth, core inflation fell to 7.6 percent.
At the same time, sustained high aggregate demand combined with the secondary effects of energy price increase are being reflected in higher services inflation.
In recent months, a downward trend in inflation expectations of households and businesses was observed, driven by seasonal factors and the stabilization of the exchange rate. These expectations, however, remain above the level of headline inflation.
In the first half of 2025, the economic growth accelerated to 7.2 percent. The high pace of growth in services was accompanied by a significant growth in the industry, construction, and agriculture sectors.
The steady growth of remittance inflows, acceleration of lending in the economy, an increase in budget expenditures, and a high investment activity are among the factors actively stimulating aggregate demand.
Meanwhile, due to restrictions in international trade and changes in global relations, the decline in global inflation is proceeding more slowly than expected. In addition, rising world food prices and inflation in major trading partner countries forming above the target levels may lead to a higher imported inflation in the future.
Under these circumstances, inflation is projected to be around 8.7 percent at the end of this year.
In order to reduce inflationary pressures in the economy and ensure price stability in the medium term, the Board of the Central Bank decided to keep the policy rate unchanged at the current level of 14 percent.
Maintaining relatively tight monetary conditions will help balance aggregate demand by preserving the attractiveness of savings in the economy, moderating the pace of lending, and ensuring proportionate pricing of resources in the money market, thereby reducing the impact of monetary factors on inflation.
At the same time, it will take certain period for headline inflation to transition to a steady downward trajectory. In the event of stronger-than-expected price pressures in the coming months, the level of restrictiveness of monetary conditions may be reconsidered.
The next meeting of the Central Bank’s Board to review the policy rate is scheduled for October 23, 2025.
