Despite declining inflation expectations and relative stabilization of the inflation rate, strong domestic demand and persistent inflationary risks associated with changes in the external economic environment require tight monetary conditions to be maintained.
Inflation dynamics. In September, headline inflation amounted to 6.4 percent year on year, edging up slightly from August. This was driven by rising prices for fruit and vegetables, fuel, and certain services. Services inflation increased to 7 percent year on year. Core inflation remained unchanged at 5.5 percent.
In recent months, supply-side factors have had a growing impact on inflation dynamics. Meanwhile, a slight increase in the share of goods and services with annual price growth above 5 percent indicates continued inflationary pressures. Given these conditions, monetary policy remains aimed at curbing secondary inflationary effects associated with supply-side factors.
Inflation expectations of households and businesses continued to decline. Specifically, in September, inflation expectations of households for the next 12 months amounted to 8.7 percent, while those of businesses reached 9.2 percent.
High volatility in global food prices and energy price risks are intensifying external inflationary pressures. The effects of these factors on domestic prices through import prices, production and transportation costs may delay the process of bringing inflation down.
Economic activity. Economic activity remains strong. In January–September 2026, economic growth amounted to 8.3 percent compared to the same period last year. Growth was primarily driven by industry, construction, and the service sector.
In the coming months, investment activity and growth in real household income will further support domestic demand. In light of these factors, the GDP growth forecast has been revised upward, and year-end growth is expected to be around 8 percent.
Moreover, increased investment and the commissioning of new production capacity will contribute to the expansion of the economy’s potential output. Nonetheless, as aggregate demand exceeds potential output, demand-driven inflationary pressures may persist.
Inflation forecast
The forecast for headline inflation has been revised, considering strong domestic demand, external risks related to energy prices, and the planned increase in certain regulated prices. According to the updated forecasts, inflation is expected to reach approximately 7 percent by the end of 2026.
At the same time, the direct effects of regulated price changes are temporary and will fade next year. Tight monetary conditions, in turn, will limit the spillover of secondary effects of these changes onto prices and inflation expectations.
As a result, core inflation is expected to remain broadly unchanged until the end of the year and to decline thereafter. Headline inflation is projected to decrease to the 5 percent target by the end of 2027.
Monetary conditions
Money market interest rates have remained close to the policy rate. Maintaining positive real interest rates on deposits and loans in the national currency ensures tight monetary conditions. This, in turn, supports the attractiveness of savings in soum and contributes to aligning aggregate demand with potential output.
Taking the above factors into account, the Board of the Central Bank decided to keep the policy rate at 14 percent per annum and to maintain tight monetary conditions.
Under current conditions, this will help prevent the widespread spillover of supply-side factors onto other prices and inflation expectations, as well as ensure a further decline in inflation.
The Central Bank will closely monitor inflation and inflation expectations, domestic demand factors, and developments in external economic conditions. Future decisions on the policy rate will be based on inflation dynamics and forecasts, inflation expectations, and the manifestation of inflationary risks.
The next meeting of the Central Bank Board to review the policy rate is scheduled for 16 December 2026.
