Central bank raises rate in response to economic risks

The Central Bank's board decided to set the key rate at 14 percent at its meeting on March 20. This was reported by the Central Bank's press service.

Inflation risks and the bank's decision

The Central Bank explained its decision by the persistence of high inflationary pressures, increasing domestic demand, and increasing inflationary expectations. According to the bank, the tightening of monetary conditions is aimed at curbing inflation and reducing it to the target level of 5 percent.

Since the beginning of 2025, the inflation rate has increased slightly, reaching 10.1 percent as of February. This is due to an increase in tariffs for some goods and services, including fuel, utilities, transport, education and medical services.

Factors affecting inflation

In recent months, the growth of aggregate demand, the activation of cross-border remittances and loans have put additional pressure on inflation. These processes are also reflected in the growth of retail trade turnover and income from paid services.

Since the beginning of the year, the real effective exchange rate has been showing a downward trend due to the strengthening of the currencies of major trading partners. Therefore, the bank considers it advisable to increase the tightness of monetary policy.

Economic forecasts for the coming quarters

According to the Central Bank's calculations, these measures will gradually slow down inflationary processes and create the basis for reducing overall inflation to 7-8 percent by the end of 2024.

However, if aggregate demand and price pressures strengthen more than expected in the coming quarters, monetary policy may be reconsidered again.

A look at the history of the key rate

On July 25, 2024, the key rate was reduced by 0.5 percentage points to 13.5 percent. This was the first time in seven years that the rate had fallen below 14 percent. Since then, the rate has remained unchanged, but was raised again to 14 percent with a decision in March.

The central bank emphasized that this decision was made to address long-term stability and inflation risks. Follow “Zamin” news on “Telegram”