The Monetary Policy Guidelines define priority objectives aimed at ensuring price stability, based on an analysis of the current macroeconomic situation and the Central Bank’s medium-term forecasts.
The document presents the Central Bank’s views on expected macroeconomic developments over the medium term, alternative scenarios based on potential macroeconomic risks, the monetary conditions required to bring inflation down to the 5 percent target and keep it at that level, as well as measures to enhance the effectiveness of monetary policy.
The Central Bank conducts monetary policy with the objective of ensuring price stability and bringing inflation to the 5 percent target by the end of 2027. In this regard, decisions on the policy rate are based on inflation forecasts, inflation expectations, the balance between aggregate demand and supply, and changes in external and domestic macroeconomic conditions.
Baseline scenario of macroeconomic development in 2027–2029
The baseline scenario assumes that external and domestic economic conditions will gradually return to equilibrium in the future. In particular, regarding external conditions, the scenario anticipates that geopolitical conflicts will ease and oil prices will gradually decline, while the major trading partners will continue to grow at a moderate pace. Moreover, regarding domestic economic conditions, assumptions include maintaining the overall fiscal deficit at around 3 percent of GDP, balanced growth in credit and domestic demand, the completion of regulated price reforms, and Uzbekistan’s accession to the World Trade Organization over the forecast horizon.
Under this scenario, economic growth is expected to reach approximately 7–7.5 percent in 2027 and 6.5–7.5 percent in 2028–2029, with economic activity approaching its potential growth rate.
According to forecasts, headline inflation will decline to the 5 percent target in the second half of 2027 and stabilize near that level in 2028–2029. Core inflation is expected to decline to 4–5 percent in 2027. Key factors contributing to this will include the fading of the direct impact of energy and utility tariff increases in previous years, balanced growth of aggregate demand influenced by tight monetary conditions, easing external price pressures, and an expansion of domestic supply capacity.
Monetary policy
Under the baseline scenario, monetary conditions are expected to remain tight in 2026–2027. The UZONIA money market rate is projected to be around 6–7 percent in real terms in 2027. This will help balance domestic demand growth, reduce inflation expectations, maintain incentives for saving in the national currency, and curb the secondary effects of rising prices.
Once sufficient conditions are in place for stabilizing inflation near the target and easing inflationary pressures, the possibility of gradually adjusting monetary conditions toward a neutral level will be considered. Decisions to ease monetary conditions will depend on inflation dynamics and macroeconomic conditions. Should inflationary pressures intensify or secondary effects manifest to a greater extent than expected, tight monetary conditions may persist for a longer period.
Alternative scenarios of macroeconomic development
External and domestic risks that could lead to a deviation from the baseline scenario have been assessed separately. These include a significant depreciation of the currencies of major trading partners, a sharp rise in oil prices and global food prices, as well as faster credit growth driven by stronger competition in the banking system.
According to estimates, these factors could push inflation higher than in the baseline scenario. Should they materialize, monetary policy will be adjusted in line with prevailing macroeconomic conditions. The primary focus will be on bringing inflation down to the 5 percent target in the medium term.
Priority areas for increasing the effectiveness of monetary policy
In 2027–2029, particular emphasis will be placed on strengthening the transmission of monetary policy and reinforcing its institutional foundations. A Monetary Policy Strategy will be developed to define the long-term principles and priority objectives of monetary policy. To fully implement the goals and objectives outlined in the Strategy, a specific Roadmap will be developed, and its implementation will be regularly monitored.
Furthermore, given the structural liquidity surplus, there are plans to improve banking system liquidity management and the operational framework, revise the interest rate corridor, introduce uniform criteria for collateral assets, and strengthen UZONIA’s role as a money market benchmark.
Work will continue on the design and implementation of instruments for absorbing liquidity from and providing liquidity to Islamic banks in accordance with Sharia principles.
To develop macroeconomic analysis and forecasting capacity, the forecasting and analysis system and the quarterly projection model will be modernized, and the use of probabilistic forecasting approaches and alternative scenarios will be expanded. This will allow for a more thorough assessment of uncertainty and enable more informed monetary policy decisions.
Additionally, measures will be implemented to improve the infrastructure of the money and financial markets, develop the derivatives market, expand the range of instruments for hedging interest rate and foreign exchange risks, and increase the liquidity and efficiency of the domestic foreign exchange market.
Improving the clarity, consistency, and accountability of monetary policy communication will also remain one of the key priorities.
To this end, a Monetary Policy Communication Strategy and a Roadmap for its implementation will be developed. It will cover issues such as the disclosure of the rationale behind policy rate decisions, inflation forecasts and risks, the Central Bank’s response to changes in economic conditions, and accountability for achieving the inflation target.
The conceptual draft of the Monetary Policy Guidelines for 2027 and the period of 2028–2029 will be published on the official website of the Central Bank of the Republic of Uzbekistan and finalized considering the proposals received.
Conceptual draft of the Monetary Policy Guidelines for 2027 and the period of 2028–2029.
