Although inflation continues to trend downward and the economy is showing certain signs of more balanced dynamics, the persistence of certain upside risks to inflation calls for maintaining current tight monetary conditions.
Inflation and inflation expectations
In August, headline inflation continued decelerating and amounted to 6.2 percent. Core inflation amounted to 5.5 percent.
At the same time, an increase in the share of goods and services with year-on-year price increases above 5 percent indicates persistent price pressures in the economy.
Inflation expectations of households and businesses also continued to decline. However, inflation expectations are declining more slowly than headline inflation, reflecting the continued influence of inflationary inertia on price-setting processes.
Domestic demand and economic activity
Positive trends in retail trade, the services sector and investment indicate strong consumer and investment demand. At the same time, in recent months signs of stabilisation have begun to emerge in some components of aggregate demand.
In particular, under the impact of current tight monetary conditions, the growth rate of credit to the economy is gradually moving toward more moderate levels. Positive real interest rates are supporting households’ propensity to save.
External inflationary risks
High prices on global commodity, food, and energy markets are continuing to exert pressure on domestic inflation through import prices, transportation, and logistics costs in the medium term.
The extent to which external price shocks have secondary effects on domestic inflation will depend largely on the dynamics of domestic demand and the structural measures being adopted.
The appreciation of the soum’s real effective exchange rate during the year due to the depreciation of the currencies of some major trading partners is helping to mitigate inflationary pressures through import prices.
Domestic inflationary risks
The ongoing liberalisation of regulated prices may exacerbate secondary inflationary effects through production costs and service prices.
Maintaining the current tight monetary conditions is considered necessary to prevent these inflationary risks from becoming persistent inflationary processes, mitigate their potential secondary effects, and ensure a consistent decline in inflation expectations.
The Central Bank will closely monitor developments in inflation and inflation expectations, domestic demand factors, and changes in external economic conditions, and will continue to ensure the monetary conditions necessary to bring inflation down to the 5 percent target by the end of 2027.
The next meeting of the Central Bank Board to review the policy rate is scheduled for 28 October 2026.
