Inflation at 6.4%: Uzbekistan's Central Bank Signals a Shift in Interest Rate Policy
Central Asia Column “Steppe Ahead”
Uzbekistan’s inflation rate stood at 6.4% in July, down from 8.9% a year earlier. Central Bank Governor Timur Ishmetov sees room for maneuver here: According to the U.S. financial news agency Bloomberg, he believes an interest rate cut is possible before the end of the year. The key interest rate stands at 14%. At the same time, the central bank is seeking high-profile assistance: Goldman Sachs and BlackRock are to advise on how the country can diversify its record reserves of 77.1 billion U.S. dollars.
Key interest rate at 14%: Central Bank hints at room for a cut
On July 29, the Central Bank Council once again left the key interest rate at 14%. The rationale: The decline in inflation is expected to take hold, while inflation expectations remain high. According to the central bank, households expect inflation of 10.1%, while businesses expect 9.9%. The official inflation target is 5%, and the central bank’s year-end forecast is 6.5%. The industry service bne IntelliNews reports an annual rate of 6.4% for July, unchanged from June. Gasoline remains the biggest driver of price increases, up 21.7% from a year ago. The core rate was most recently 5.7%.
On August 24, Ishmetov spoke at a financial forum in Tashkent. The Uzbek news portal Gazeta.uz quotes him as saying: “All these external shocks, especially the current trends in oil and food prices, have not yet directly affected Uzbekistan. But we are monitoring the situation closely.” He continued: “The central bank must be prepared to act in either direction, regardless of whether inflation continues to fall or upside risks materialize.” The next interest rate meeting is scheduled for September 16. The economy can afford to be patient: Gross domestic product grew by 8.5% in the first half of the year, following 7.7% growth for the full year of 2025. For 2026, the central bank expects growth of 7.5% to 8%. As recently as March, the central bank had a different tone. At that time, it threatened further tightening if external risks materialized. In response, the Dutch bank ING halved its projected room for rate cuts in 2026 from 200 to 100 basis points.
Goldman Sachs and BlackRock Advise on Reserve Investment
At the same time, the central bank is professionalizing its reserve management. According to Bloomberg, it has invited Goldman Sachs and BlackRock to make proposals for its investment strategy. International reserves reached a record high of $77.1 billion in March, up from $66.3 billion at the start of the year. Gold accounts for about 83% of this total: at the end of 2025, it stood at US$55.1 billion, or more than 400 metric tons. Uzbekistan continues to buy more. According to the World Gold Council, the central bank purchased 41 metric tons in the first half of the year and was the third-largest buyer of gold among central banks in June, reports the Uzbek portal Zamin.uz. It was not until 2024 that the central bank began investing in U.S. Treasury bonds as well, with investments totaling $1 to $1.5 billion to date. It has been using the World Bank’s RAMP advisory program since 2020, and its own investment committee has been in operation since 2023. According to the TV channel Euronews, Tashkent distributes its foreign exchange reserves among 35 international banks in 16 countries. The country remains conservative when it comes to gold. Kamol Alimuhammedov, acting director of reserve management, told Euronews in February: “We store all our gold reserves here in Uzbekistan, in the Central Bank’s vaults.” He said the top priority is the security of the reserves.
Gold Concentration Remains the Greatest Risk
The figures show a country finding stability in its monetary policy. By regional standards, Uzbekistan is in a good position: Kazakhstan reported 10.3% inflation in June, while Kyrgyzstan expects up to 15% for 2026. This is a compelling factor for foreign investors. A currency with falling inflation reduces the cost risk for long-term projects, from solar parks to copper mines. Yet two risks remain. First, the record reserves depend on the price of gold. The high gold share of 83% inflated the reserves during the price boom. If the price falls, the buffer shrinks without a single metric ton leaving the country. This is precisely why the mandate for Goldman Sachs and BlackRock is more than just symbolic: it is intended to reduce dependence on a single commodity.
Second, the interest rate turnaround is not a foregone conclusion. The Dutch bank ING already dampened expectations back in the spring. According to ING, easing is on the horizon toward the end of the year, and inflation in 2026 is likely to be around 8%, well above the central bank’s forecast. Rising oil and food prices on global markets could throw a wrench in the works, as Ishmetov himself admits. For companies in the country, however, a rate cut would still send a strong signal. In real terms, the key interest rate is a good seven percentage points above inflation, so loans in the national currency, the sum, remain correspondingly expensive. An initial cut would make investment more affordable and support the credit cycle without necessarily jeopardizing disinflation. September 16 will thus be a test case: Does Tashkent have confidence in its own price stability, or will the central bank wait until household inflation expectations also fall into single digits?
Source: Gazeta.uz, Bloomberg, bne IntelliNews, Gazeta.uz (interest rate decision), ING, Zamin.uz, Euronews (all EN)