Monetary policy Objective and principles

Update date: 15 Nov 2024, 15:04

Monetary Policy Objective

According to the Law "On the Central Bank of the Republic of Uzbekistan," developing and implementing monetary policy is one of the Central Bank's main responsibilities.

The Central Bank develops and implements monetary policy with the goal of ensuring price stability, which means maintaining a low and stable level of inflation.

Under Presidential Decree No. UP-5877 "On Improving Monetary Policy with a Gradual Transition to an Inflation Targeting Regime," the inflation target has been set at 5 percent, with the responsibility for achieving this goal assigned to the Central Bank.

The Central Bank’s commitment to the inflation target preserves the purchasing power of income and savings for households and businesses, allowing them to plan long-term expenses, and fosters favorable conditions for sustainable and inclusive economic growth. Consistently low inflation also helps attract stable investment to the country, reduces interest rates by lowering the inflation premium, and decreases the economy's vulnerability to external risks by strengthening confidence in the national currency.

Effective monetary policy enables the prevention of sharp and prolonged deviations in economic growth from its potential and provides tools to mitigate negative consequences.

Inflation targeting regime

Since 2020, the Central Bank of the Republic of Uzbekistan has been conducting monetary policy within an inflation targeting framework. Under the inflation targeting regime of monetary policy, a target level for inflation is set, and all actions of the Central Bank are aimed at keeping inflation near this target.

Main principles of monetary policy

Setting an inflation target and focusing all monetary policy measures to achieve it;
The policy rate of the Central Bank is the key instrument of monetary policy implementation;
The operational mechanism of monetary policy is developed and improved independently by the Central bank;
Monetary policy decisions and measures are based on comprehensive macroeconomic analyses and forecasts;
The Central Bank conducts exchange rate policy under a free-floating exchange rate regime;
Monetary policy is implemented transparently, with each decision explained in detail to the general public.