Uzbekistan’s Central Bank maintained its benchmark interest rate at 14% annually on December 11, signaling confidence that its tight monetary grip is working while acknowledging lingering economic pressures that keep rates from easing anytime soon.
The decision reflects measurable progress on inflation — a key concern for policymakers and businesses alike. Annual inflation dropped to 7.5% in November from earlier double-digit levels, with core inflation falling to 6.3%. The decline was buoyed by a strengthening national currency, declining import costs, and stable pricing for non-food goods. The Central Bank expects inflation to settle around 7.3% by year-end 2025 and cool further to approximately 6.5% by the close of 2026, gradually approaching the bank’s medium-term target of 5%.
Consumer demand and credit growth keep pressure on
Yet inflation remains sticky in some areas, particularly services, where price growth has accelerated. The Central Bank specifically flagged persistent risks tied to strong consumer demand, supply-side pressures, and rapid growth in retail lending — now expanding as financial inclusion deepens across the country. While this vibrant credit activity reflects economic confidence and growing access to financing, it also threatens to reignite price pressures if left unchecked.
The broader economy continues firing on all cylinders. Labor market demand remains robust, trade revenues and paid services are climbing, and interbank transaction volumes are expanding. Economists project economic growth of 7% to 7.5% for 2025 — solid expansion that suggests the tight monetary policy is not choking off activity, at least not yet.
Next policy decision looms in late January
The Central Bank will revisit its interest rate decision on January 28, 2026. Officials stressed that future rate adjustments will hinge on inflation dynamics and the evolution of price risks. The 14% rate — maintained now for months — represents a deliberate holding pattern: tight enough to corral inflation without throttling growth, but potentially unsustainable long-term if price trends don’t cooperate.
For international businesses eyeing Uzbekistan as a market for investment, trade, or expansion, this monetary posture matters considerably. A 14% lending rate raises borrowing costs for operations, inventory financing, and capital projects, directly impacting return calculations and project feasibility. Simultaneously, the currency’s recent strength against major trading partners affects import and export competitiveness, while moderating inflation supports price stability for locally sourced materials and labor. The strong economic growth underpins domestic demand for construction materials, machinery, furniture, and interior finishes — sectors linked to rising living standards and business investment. However, persistent retail credit growth and service-sector price acceleration signal that competitive pricing pressures may ease more slowly than hoped. International players should monitor the January 28 decision closely; any rate cut would signal the bank’s confidence in inflation control and could unlock cheaper financing across the economy, while a hold suggests officials remain cautious about premature easing.
