Recent trends in headline and core inflation indicate that ongoing inflation processes and the situation remain uncertain. Risks associated with imbalances between aggregate demand and supply, as well as increasing external uncertainties, require maintaining relatively tight monetary conditions at current level.
This decision will support a sustainable decline in inflation and inflation expectations, creating necessary conditions to achieve medium-term target of 5 percent.
Since the beginning of the year, the headline inflation has been on an upward trajectory, reaching 10.3 percent annually in March. Meanwhile, core inflation continued to accelerate, reaching 8.1 percent annually. This, in turn, reflects that along with supply factors, demand factors are also exerting upward pressure on prices.
Despite a decrease in March due to the improved fuel and energy supply and a relatively stable exchange rate, inflation expectations among the households and business entities remain elevated, exceeding the current inflation.
The initial impact of energy price liberalization in 2024 is expected to end in the second quarter and have a downward impact on headline inflation. In addition, the deterioration of the terms of international trade, along with rising global consumer prices, increases the risk of rising production costs and increased external inflationary pressure.
According to updated forecasts, headline inflation is expected to approach the upper bound of the forecast corridor, 7–8 percent, by the end of 2025.
In the first quarter, economic growth accelerated to 6.8 percent due to an increase in aggregate consumption and investment activity. Robust growth in cross-border remittances and an acceleration in credit growth continue to support the aggregate demand.
In 2025, the trend of GDP growth is projected to remain solid, reaching around 6 percent by year-end, supported by sustained economic activity. In particular, private investment is expected to serve as a factor in driving growth and expanding the supply of goods and services.
Since the beginning of 2025, the real effective exchange rate has remained within the medium-term trend, supported by the appreciation of exchange rates in major trading partner countries and the relative stability of the soum.
Maintaining the current level of monetary conditions will help balance aggregate demand and mitigate the impact of monetary factors on inflation through containing credit growth and sustaining strong deposit growth.
Taking these factors into account, and in line with the objective of achieving medium-term price stability, the Board of the Central Bank has decided to keep the policy rate unchanged at 14.0 percent.
The Central Bank will continue to maintain sufficiently tight monetary conditions to ensure that inflation gradually declines to the 5 percent target level in the medium term.
Given the secondary effects of the upcoming phase of energy price liberalization scheduled for May, monetary conditions may be revised based on its impact on inflation and inflation expectations.
The next meeting of the Board of the Central Bank to review the policy rate is scheduled for June 12, 2025.
