Uzbekistan policy rate on hold, with cuts possible but distant

The Central Bank of Uzbekistan (CBRU) kept the policy rate unchanged at 14.00%, in line with our expectations. This follows the recent example of Kazakhstan, which also opted for a hold, reflecting a more cautious mood in the region amid continued tensions in the Middle East.

The tone of CBRU's April statement was less hawkish than in March. We see this as signalling a reduced risk of further tightening, rather than guidance toward a near-term rate cut, as caution remains warranted.

• Inflation assessment improved: headline CPI slowed to 7.1% YoY in March, moving toward the CBRU’s 6.5% YE26 forecast; core CPI stopped accelerating and fell to 5.7% YoY; households’ inflation expectations continued to decline.
• Fiscal impulse played down: budget expenditures are no longer cited as a growth-supportive factor, consistent with fiscal consolidation. According to recent reports, the consolidated budget deficit shrank to 2.1% of GDP in 2025, by 1pp vs 2024 and 2.6pp vs 2023.
• Tightening guidance removed: April forward guidance refers to ensuring “sufficient restrictiveness” if pro-inflationary risks materialise, replacing March’s explicit signal that policy may be tightened further.

• Inflation remains above the 5% medium-term target, and inflation expectations are still not fully anchored.
• External risks (geopolitics, oil and food prices, logistics costs) continue to skew toward higher imported inflation pressures for Uzbekistan, despite the recent moderation in PPI growth to 13.0% YoY.

• Domestic demand stronger than expected: GDP growth surprised on the upside at 8.7% YoY in 1Q26, prompting an upward revision of the official 2026 growth outlook to 7.0-7.5%.
• Disinflation seen as fragile: part of the recent CPI slowdown is attributed to base effects, signalling limited confidence in a durable disinflation trend.