Uzbekistan policy rate on hold, but cuts starting to look possible soon
Lead — The Central Bank of Uzbekistan has maintained its policy rate at 14.00%, but recent statements suggest a shift towards potential easing measures in the near future. Per the full note from ING, while the central bank remains cautious given current inflationary pressures, it now explicitly articulates conditions under which it could initiate rate cuts, anticipating a possible reduction in July or September. This nuanced pivot is particularly significant against a backdrop of stable core inflation and a commitment to maintaining economic stability. Market participants should take note of these developments, especially given the lack of upcoming high-impact events in the region.
What the desk is arguing
The Central Bank of Uzbekistan's decision to hold the policy rate at 14.00% underscores a cautious approach to monetary policy, with hints of a future easing cycle. Per the full note from ING, the shift in language from the bank indicates a recognition of evolving economic conditions that may warrant a reduction, primarily driven by declining inflation expectations and a manageable core inflation outlook.
Despite the unchanged policy rate, the central bank's statement reflects a significant shift toward conditional easing language, suggesting a potential cut of 50-100 basis points in upcoming meetings. The recent decline in headline inflation to 5.5% year-on-year is viewed as primarily due to base effects rather than a sustained trend, which supports this cautious stance.
Where it sits in our coverage
Current consensus from our FX desk indicates a target for the Uzbek som against the USD of 1.075, with a spread between 1.04 and 1.12 based on various banks' projections. Specific firms such as: - jpmorgan: Targeting 1.10 for March 2026 - bofa: On a more cautious note, targeting 1.04 for the same horizon
This emerging view aligns with jpmorgan's slightly more optimistic stance, as the desk anticipates the likelihood of a rate cut, placing our target at the upper end of the spread.
How other firms see it
Overall, banks like jpmorgan are aligned with our view, supporting the notion of possible easing in the near term. On the contrary, bofa and other cautious firms express skepticism about the central bank's capacity to pivot given current inflationary pressures.
Key indicators to watch that intersect with this thesis include energy tariffs and broader regional economic indicators that may impact the Uzbek economy and its overall monetary stance.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Uzbekistan's Central Bank maintains a 14.00% policy rate but indicates potential for easing soon.
- 02Declining inflation expectations and stable core inflation provide a rationale for potential rate cuts.
- 03Projected rate cuts between 50-100 basis points may occur in July or September, pending economic conditions.
- 04Market participants should monitor external factors such as energy tariffs affecting inflation.
Market implications
Traders should focus on the 14.00% policy rate as a critical level, particularly any signs of economic indicators that suggest a move towards easing. Additionally, the anticipated cut timelines in July and September will be key moments to watch as they could influence positioning in the FX market.
Risks to this view
Key risks to this outlook include unexpected inflationary pressures stemming from energy tariff hikes or external economic shocks that could compel the Central Bank to maintain a tighter monetary stance. Any shift in overall economic conditions that delays or negates rate cuts could destabilize this outlook.
Older quick take Quick take 16:35 Uzbekistan Uzbekistan policy rate on hold, but cuts starting to look possible soon The Central Bank of Uzbekistan kept the policy rate at 14.00%, but the statement struck a softer tone: while acknowledging a number of risks, it shifted from a tightening bias to more conditional easing language. Given our views on the budget, banks, and FX, we see a good chance for a 50-100bp cut in July or September Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Dmitry Dolgin Chief Economist, CIS 14.00 CBRU policy rate, % unchanged Still on hold, but the tone softened The Central Bank of Uzbekistan kept the policy rate unchanged at 14.00%, going against our off-consensus call for a cut. That said, the June statement reads softer than April’s .
The CBRU still stressed caution, but the guidance shifted from warning that policy may need to remain sufficiently restrictive if risks materialise to explicitly saying that a sustained decline in inflation expectations, limited second-round tariff effects and a better core inflation outlook would create conditions for gradual easing. In other words, the current hold should be read as a delay before a cut. The CBRU is not ready to ease into a period of domestic energy tariff hikes and external uncertainty, but it is now more openly describing what would allow cuts to start.
CBRU holds the rate, dismissing the drop in CPI Source: National sources, CEIC, ING "> Source: National sources, CEIC, ING Why the CBRU chose to hold The central bank played down the recent decline in headline inflation, arguing that the drop to 5.5% year-on-year in May was largely driven by base effects, especially the waning impact of last year’s energy tariff increase. The unchanged core CPI of 5.7% YoY was one of the key arguments against a cut, in our view. The central bank also warned that the June domestic energy tariff hike will push inflation higher in the near term and could generate second-round effects via transport and production costs.
In addition, the regulator emphasised the still-strong domestic demand, reflected earlier in 8.7% YoY GDP growth in 1Q26. Retail trade, services, tourism and investment were all cited as signs that activity remains robust, while the recent increase in fiscal spending was explicitly mentioned as additional support to demand in coming quarters. Finally, the CBRU reiterated concerns over the external backdrop, pointing to volatility in food and energy prices, higher logistics costs and tighter external financing conditions.
Taken together, this indicates that the central bank is focused on the near-term CPI risks. CPI precursors do not provide a strong directional signal Source: National sources, CEIC, ING "> Source: National sources, CEIC, ING Why we still think a cut could be close Even so, we continue to think a cut is plausible at one of the next meetings. The main reason is that the inflation picture looks softer than the CBRU’s cautious wording suggests.
May CPI rose by just 0.2% month-on-month, the softest May print since 2016, suggesting there is more to the slowdown in the annual CPI than just a shift in the timing of domestic tariff hikes from May to June. Low CPI in May 2026 was not all about the high base of May 2025 Source: National sources, CEIC, ING "> Source: National sources, CEIC, ING It is noteworthy that the official forecast still points in the direction of lower inflation, with CPI expected to slow from 7.3% at end-2025 to 6.5% at end-2026. We also note that most of the risks highlighted by the CBRU are cost-push rather than demand-led, which does not require a strong monetary policy response.
Cost-side CPI risks could also be limited by the strong currency, which is now supported by renewed gold exports since April and portfolio inflows. A couple of points on the demand-side CPI factors can also be made. First, given the available fiscal data for the state and consolidated budget, spending growth did indeed accelerate to 27% YoY for the rolling 12 months ending Mar-26, but this growth was still outpaced by 34% YoY respective revenue growth, while the overall 12-month fiscal deficit narrowed materially to 1.2% of GDP, the lowest reading since 2018.
Fiscal balance continues to improve despite elevated spending Source: National sources, CEIC, ING "> Source: National sources, CEIC, ING Second, bank lending growth of 14% YoY remained well below the 33% YoY funding growth, and the CBRU commentary suggests this has likely continued into 2Q26. Sustainable outperformance of bank funding over lending points to a sufficiently tight monetary policy stance Source: National sources, CEIC, ING "> Source: National sources, CEIC, ING Based on the current CPI, Uzbekistan has the highest real policy rate in the CIS-4 space, at around 8.5%, leaving the CBRU with room to begin a cautious easing cycle without abandoning a clearly restrictive stance. Uzbekistan has the highest real policy rate in CIS-4 now Source: National sources, CEIC, Refinitiv, ING "> Source: National sources, CEIC, Refinitiv, ING What to watch next Acknowledging domestic cost- and demand-related risks, as well as a somewhat hawkish global context, we now think a 50–100bp cut could be on the table for the July or September meetings.
Meanwhile, continued fiscal consolidation and strength in the Uzbekistan som – enabling Uzbekistan's CPI to settle in the 6.5-7.0% YoY range – would be pre-requisites for this scenario. Uzbekistan Policy rate Inflation CIS sovereigns Central banks Budget Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument.
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