The notable decline in inflation in recent months is largely explained by the fading of the previous year's high base effects. At the same time, the dynamics of underlying inflation indicators, strong domestic demand, and external economic uncertainties necessitate maintaining tight monetary conditions.
In May, annual headline inflation reached 5.5 percent, aligning with the forecasted trajectory. This decline was primarily driven by the waning of the base effects of last year's increase in energy tariffs.
At the same time, the components of underlying inflation remained broadly unchanged, with core inflation at 5.7 percent. While services inflation continued to slow, food inflation experienced some acceleration.
Inflation expectations among households and businesses continued to decline. The long-term expectations of financial sector experts also improved.
Economic momentum remains strong. In particular, robust growth in retail trade, services, tourism, and investment volumes indicates continued strength of aggregate demand. Moreover, the recent increase in fiscal spending is expected to support economic activity and demand factors in the coming quarters.
The June increase in energy tariffs will exert short-term upward pressure on inflation. Beyond this direct impact, second-round effects on transportation and production costs will continue to influence price dynamics over the coming quarters.
The Central Bank maintains its inflation forecast at around 6.5 percent by the end of 2026, with economic growth projected within the 7.0–7.5 percent band.
Positive real interest rates in the economy are stimulating savings by households and businesses, supporting balanced credit growth, and helping to contain inflationary pressures.
Uncertainty in the external economic environment remains elevated. Volatility in global food and energy prices, along with risks associated with rising logistics costs, increase the likelihood that external inflationary pressures will be transmitted to domestic prices through import channels. In addition, the tight monetary policies pursued by some foreign central banks are likely to keep the cost of external financing elevated for a longer period.
Taking these factors into account, the Board considers it necessary to maintain a tight monetary policy stance in order to ensure price stability and reduce inflation expectations.
Going forward, a sustained decline in inflation expectations, limited secondary effects from tariff adjustments, and an improvement in the core inflation outlook will create conditions for the gradual easing of monetary policy.
The Central Bank's monetary policy will remain focused on reducing inflation to its medium-term target of 5 percent, ensuring macroeconomic stability, and preserving households' purchasing power.
The next meeting of the Central Bank Board to review the policy rate is scheduled for 29 July 2026.
