The central bank's board decided to set the key rate at 14 percent during the meeting on March 20. This was reported by the central bank's press service.
Inflation risks and the bank's decision
The central bank explained its decision by the high level of inflationary pressures, the increasing domestic demand, and the strengthening of inflation expectations. The bank emphasized that tightening monetary conditions is aimed at curbing inflation and bringing it down to the 5 percent target level.
Since the beginning of 2025, the inflation rate has slightly increased, reaching 10.1 percent by the end of February. This is related to the rise in prices of certain goods and services, including fuel, utilities, transportation, education, and medical services.
Factors affecting inflation
In recent months, the growth of aggregate demand, the activation of cross-border remittances, and loans have been putting additional pressure on inflation. These processes are also reflected in the growth of retail trade turnover and revenues from paid services.
Since the beginning of the year, the real effective exchange rate has shown a downward trend due to the strengthening of the currencies of key trading partners. For this reason, the bank considers increasing the rigidity of monetary policy as an appropriate measure.
Economic forecasts for the upcoming quarters
According to the central bank's calculations, these measures will gradually slow down inflationary processes and create conditions to reduce overall inflation to 7-8 percent by the end of 2024.
However, if aggregate demand and price pressures exceed expectations in the upcoming quarters, the monetary policy may be reviewed again.
A look at the history of the key rate
On July 25, 2024, the key rate was lowered by 0.5 percent, setting it at 13.5 percent. This was the first time in seven years that the rate fell below 14 percent. Since then, the rate had not changed, but with the decision in March, it was raised back to 14 percent.
The central bank emphasized that this decision was made to achieve long-term stability and to mitigate inflation risks.
