Photo: ING Group

BAKU, Azerbaijan, August 14. Uzbekistan's central bank is likely to keep interest rates elevated for longer than previously expected as persistent inflation risks, suspended gold exports and external imbalances strengthen the case for maintaining a tight monetary policy stance.

This follows an analysis by ING Think after the Central Bank of Uzbekistan (CBU) left its key policy rate unchanged at 14% and adopted a more hawkish tone in its latest policy guidance.

According to ING, the CBU has effectively ruled out the prospect of a near-term rate cut by removing previous language that had suggested conditions could emerge for gradual monetary easing. Instead, the regulator is emphasizing rising inflationary pressures, stronger domestic demand and external risks.

ING noted that the central bank appears committed to maintaining one of the highest real interest rates in the region to encourage domestic savings, support the attractiveness of soum-denominated assets and reinforce stability in the foreign exchange market.

The report also highlighted that Uzbekistan's gold exports have remained largely on hold since May following a brief recovery in April. While higher global gold prices could eventually encourage exports to resume, the prolonged pause is weighing on the country's trade balance and increasing reliance on foreign portfolio inflows to support the national currency.

According to ING, maintaining a stronger soum would help limit imported inflation and support the CBU's long-term objective of reducing inflation to 5%.

The bank no longer expects Uzbekistan to begin cutting interest rates in September. However, it believes a cautious easing cycle could still begin later this year if fiscal consolidation continues, core inflation moderates and gold exports resume.

Trend's analysis shows that the CBU is increasingly prioritizing macroeconomic and currency stability over supporting credit growth. The combination of persistent inflation risks, strong domestic demand and external trade pressures has shifted the focus from preparing markets for lower interest rates to preserving restrictive monetary conditions.

Trend's calculations show that Uzbekistan's current policy rate of 14% exceeds the CBU's year-end inflation forecast of 6.5% by 7.5 percentage points, leaving one of the highest positive real policy rate margins in the region. Such a spread strengthens the appeal of soum-denominated financial assets while helping contain inflation expectations and support the exchange rate.

In Trend's assessment, the suspension of gold exports has become an increasingly important factor in Uzbekistan's monetary outlook. With export revenues temporarily constrained and the trade deficit remaining elevated, maintaining high real interest rates provides an additional buffer for the foreign exchange market. Unless inflation eases more decisively and gold shipments recover, the central bank is likely to keep monetary policy tight well beyond the summer, delaying the start of its easing cycle.