Central Bank raises inflation forecasts amid energy tariff hikes

The Central Bank of Uzbekistan has revised its inflation forecasts downward for the next two years, citing heightened investment activity and the May increase in energy tariffs as key inflationary drivers. The updated outlook was presented in the regulator’s first-quarter monetary policy report.

Photo: KUN.UZ

According to the report, inflation accelerated more sharply than anticipated during the January–March period. Amid growing demand and intensifying supply-side pressures, the Central Bank now expects inflation to decelerate more slowly than previously projected over the coming quarters.

The inflation forecast for 2024 has been revised to 8%, up from the earlier range of 7.5–8%, while the forecast for 2026 has been adjusted to 5–6% from the previous 5%. The regulator now expects to meet its target inflation rate of 5% in the second half of 2027.

The Central Bank noted that maintaining the current level of tight monetary policy will help guide inflation onto a downward path in the latter half of this year. It also expressed readiness to raise the base interest rate (currently at 14% annually since March 20) should new inflationary pressures emerge.

Key inflationary risks highlighted:

Rising investment activity, which may fuel overall demand and price pressures.
Liberalization of energy tariffs in May, likely to raise production costs and amplify inflation expectations among businesses.
Uncertainty around external demand, driven by fluctuations in import duties, exchange rate dynamics, and economic trends in countries hosting Uzbek migrant workers.

The Central Bank added that due to recent trade optimization, the strengthening of partner currencies, and the relative stability of the Uzbek UZS, exchange rate–driven inflationary pressure is not expected in the coming months.

From January to April, inflation rose by 2.9%, compared to 2.6% during the same period last year. Annual inflation remains above 10%, which is 2 percentage points higher than last year’s figure.

According to S&P Global Ratings, inflation in Uzbekistan is projected to reach 10.1% in 2025, primarily due to higher energy tariffs. The agency expects inflation to gradually decline to 8.6% by 2028, up from its earlier forecast of 6.5% by 2027.

Earlier in May, Central Bank Chairman Timur Ishmetov expressed hope that 2025 would be the last of the “difficult years” in terms of inflation management. The regulator still anticipates inflation to ease to 8% by the end of this year, and to 6% in 2026.

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