Uzbekistan Rates Stay On Hold, But Hopes For 2027 Cuts Remain

(MENAFN- ING)

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

"> 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.

Uzbekistan's fiscal consolidation remains a watch factor Source: National sources, CEIC, ING

">

The second is the soum. While the currency has so far shown resilience to global volatility, appreciating 2% against the USD since the outbreak of the Iran war, this appears to have been driven largely by capital inflows, with very little support from the trade side.

That could change over the medium term. Uzbekistan's physical gold exports have been unusually restrained this year, with only 18 tonnes exported in January-September versus 85 tonnes in the same period of 2025, and actual physical exports recorded in only two months, April and July. If gold export volumes return closer to their historical range of 80-120 tonnes per year, the resulting FX inflows could provide additional support to the currency and help contain imported inflation.

Uzbekistan's gold exports have been restrained in 2026, a catch-up would be UZS supportive Source: National sources, CEIC, ING

">

Our main takeaway is that Uzbekistan retains room for monetary policy easing in 2027, provided fiscal restraint persists and the soum regains support from gold exports. For now, however, robust domestic activity and elevated external inflation risks argue for keeping real rates high, making another hold the most likely outcome at the December meeting.

MENAFN04112026000222011065ID1111916342