At a meeting of the board of the Central Bank, it was decided to leave the main rate unchanged

Inflationary processes and expectations in the economy, after a decline in the first half of the year, accelerated somewhat against the backdrop of changes in the supply of goods and inflationary factors on the demand side, the press service of the Central Bank reports.

The current level of the main rate will serve to ensure the necessary monetary conditions for the formation of inflation within the forecast indicators by the end of the year.

Overall inflation has been trending downward since the beginning of the year, but in the last quarter it accelerated to 9.2%. Among the structural factors, the acceleration of food price growth to 11% and the increasing contribution of changes in regulated prices to the overall inflation rate stand out.

Core inflation has fallen since the beginning of the year and stood at 10.3% in September. Despite this downward trend, a significant gap with general inflation remains. This indicates a high rise in prices for stable components of inflation, requiring relatively tight monetary conditions in the economy.

Inflation expectations of the population and entrepreneurs for the next 12 months will decrease to 13.5 and 14.25%, respectively, after increasing in August. Economic expectations remain highly sensitive to short-term shocks.

Uncertainty remains regarding the duration of global inflationary processes. The situation with the current dynamics of inflation and exchange rates in major trading partners increases pressure on the strengthening of the real effective exchange rate of the soum.

Based on the results of 9 months of this year, positive trends are observed in the real sector of the economy; GDP increased by 5.8% compared to the corresponding period last year.

High rates of economic growth were achieved due to increased consumer spending under the influence of fiscal incentives and a significant increase in the volume of non-centralized investments.

The economy maintains positive dynamics of growth in aggregate demand, which was manifested in an increase in the volume of market services provided by 12.1% and monetary revenue from trade and paid services by 28% compared to the corresponding period last year.

However, cross-border remittances decreased by 33.7% compared to the same period last year due to the high base effect, but increased by 1.4 times compared to the corresponding period in 2021.

There was also an increase in activity in the interbank money market; the weighted average interbank deposit and repo rates were completely formed in the interest rate corridor.

Relatively tight monetary conditions serve to ensure moderate growth rates of loans allocated to the economy. In addition, the high growth rates of retail lending observed in recent months are offset by the application of macroprudential measures, and additional measures may be applied in the future if necessary.

Positive real interest rates ensure high activity in the retail segment of the deposit market. In September, the weighted average interest rate on household time deposits in national currency amounted to 21.1%, the annual increase in the balance of time deposits as of October 1 amounted to 47.1%, including time deposits of individuals – 52.3%.

Based on the balance of factors that increase and decrease inflation, according to updated forecasts, at the end of the current year, inflation is expected to form within the forecast corridor.

Pro-inflationary factors remain, such as seasonal increases in food prices, as well as the primary and secondary impact of changes in regulated prices on overall inflation.

The Central Bank assesses the impact of monetary conditions on aggregate demand, prices and inflation expectations and strives to orient all monetary instruments to ensure the formation of inflation within the current year forecast and achieve the target in the medium term.

The next meeting of the Board of the Central Bank to consider the main rate is scheduled for December 14, 2023.