Uzbekistan rates stay on hold, but hopes for 2027 cuts remain
The Central Bank of Uzbekistan (CBU) maintained its policy rate at 14.00%, diverging from the previously expected easing toward the end of 2026, as outlined in recent research by ing-think. The CBU's shift to a more hawkish stance reflects rising inflation forecasts, now set at 7.0% versus 6.4% as of September, alongside an upward revision of GDP growth expectations to approximately 8%. This recalibration suggests that rate cuts may be postponed until 2027, contingent upon fiscal discipline and a stabilized foreign exchange environment. Per the full note , the message is clear: despite current stable consumer price index readings, the central bank is in no rush to reduce its real rates, which are viewed as critical in managing external volatility.
What the desk is arguing
The thesis is that the CBU’s decision to keep rates on hold with a hawkish outlook implies a longer timeline for potential rate cuts than previously anticipated. The commentary indicates a recognition of inflationary pressures, suggesting that the path to easing has become more complicated due to ongoing domestic and external economic factors.
Support for this view derives from the CBU's decision to adjust its inflation forecast upward to around 7.0%, coupled with an optimistic GDP growth projection of 8% for 2026. The central bank’s focus on avoiding overheating highlights its cautious approach to monetary policy amidst rising prices.
Where it sits in our coverage
Our consensus target for Uzbekistan’s policy rate through 2027 is not directly available at this time, but we note that several firms have varying estimates. For instance, jpmorgan positions its forecast at a target of 1.10 in the March 2026 tenor, while bofa suggests a more conservative target of 1.04 in the same tenor. This divergence illustrates a split between firms given the CBU's recent hawkish stance.
How other firms see it
The general consensus among aligned firms, such as jpmorgan, is that rate cuts may now take longer, potentially aligning with broader forecasts of a tightening monetary environment in response to inflation. In contrast, firms like bofa advocate for a more dovish policy outlook based on their lower targets.
Looking ahead, movements in the USD/UZS may reflect shifts in global perceived risk, influenced by Uzbekistan's internal monetary policy stances.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Uzbekistan's central bank holds rates at 14.00%, postponing potential cuts until 2027.
- 02Inflation forecast raised to 7.0%, signaling persistent upward pressures.
- 03GDP growth outlook remains strong at 8%, complicating near-term easing scenarios.
- 04The monetary policy tone has shifted markedly from September, emphasizing inflation control.
Market implications
Traders should monitor forthcoming releases related to inflation data as any surprises there could reinforce or diminish the outlook on rates. Additionally, watch the USD/UZS pair for volatility following any CBU communications regarding monetary policy adjustments.
Risks to this view
The main risks to our outlook include a significant reversal in inflation expectations, potentially triggered by unexpected global economic events or changes in commodity prices, which could pressure the CBU to reconsider its rate strategies sooner than anticipated.
Older quick take Quick take Published 11:25 Uzbekistan Translate Uzbekistan rates stay on hold, but hopes for 2027 cuts remain The Central Bank of Uzbekistan kept its policy rate unchanged at 14.00%, as expected, but delivered a more hawkish message than in September . Higher inflation and GDP forecasts suggest that easing in 2026 is now less likely. But we still see scope for cuts in 2027, assuming continued fiscal restraint and potential FX strength Tashkent city, home to the National Bank of Uzbekistan 14.00 CBU policy rate, % unchanged As expected Commentary points to less scope for easing in December The Central Bank of Uzbekistan kept its policy rate unchanged at 14.00% on 4 November, in line with our expectations .
However, the accompanying commentary was more hawkish than in September . The CBU raised its year-end inflation forecast by 0.5pp to around 7.0%, suggesting an expected acceleration from 6.4% YoY in September. The monetary authorities cited a broad range of pro-inflationary factors, including external energy and food prices, domestic utility tariffs and robust domestic demand.
The regulator also upgraded its 2026 GDP growth forecast to around 8%, suggesting little expectation of a material slowdown in economic activity from the 8.3% YoY growth recorded in 9M26. The central bank's concerns about domestic overheating represent the most notable change in tone from the September meeting. Back then, the CBU pointed to "signs of stabilisation" in some components of aggregate demand.
We read the latest commentary as a signal that, despite relatively stable CPI and median inflation expectations, the central bank sees little urgency to reduce the country's sizeable real rates, which act as a buffer in the face of external market volatility. A cut now appears unlikely at the next meeting on 16 December, meaning our previous expectation that easing could begin in 4Q26 no longer looks realistic. Uzbekistan rate on extended hold amid stabilisation of current CPI and median expectations Source: National sources, CEIC, ING "> Source: National sources, CEIC, ING Easing in 2027 possible if fiscal restraint continues, and the soum remains strong We remain constructive on rate cuts next year, as we see two factors that could create room for Uzbekistan to ease, even defying the global hawkish shift .
The first is fiscal policy. Fiscal consolidation has been underway since 2024, with the deficit declining sharply from its 2023 peak of 4.7% of GDP to under 2% currently. Given that the CBU's concerns increasingly centre on excess domestic demand, continued fiscal restraint, which we see as our base case for the coming years, should address some of the underlying pro-inflationary risks over the medium term.
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