The Central Bank's Board on June 12, 2025, made the decision to keep the key rate unchanged at 14 percent annually here.
It is reported that the dynamics of economic activity and consumer demand in recent months, as well as the rising trend of core inflation, indicate that inflationary pressures remain in the economy. Despite a slight decrease in overall inflation in May, this leads to inflation forming above the forecast trajectory. In this context, to mitigate the secondary effects of rising energy prices and ensure a stable declining trend in overall inflation, the key rate was maintained at its current level.
Since the beginning of the year, the general inflation rate has been forming an upward trend, and due to the primary effect of last year's energy tariff increases fading, it decreased to 8.7 percent annually in May. The inflation expectations of the population and businesses are forming at a higher level than the overall inflation.
Inflation in services accelerating led to the continuing upward dynamics of core inflation, reaching 8.5 percent annually in May. The conditions of high gross demand in the economy result in the emergence of secondary effects of the current energy price increases, indicating a longer duration of inflationary pressures.
High economic activity in the January–May period of 2025 was one of the main factors shaping gross demand. This was reflected in the increase in revenues from trade and paid services, volumes of cross-border money transfers, as well as in the growth of interbank transaction volumes and the number of real estate sales transactions.
Additionally, the high rates of credit allocation to the economy and the growth of budget expenditures are also contributing to stimulating economic activity. These factors may potentially support gross demand in the future, intensifying pressure on price levels in the economy.
Uncertainties in the world economy and tensions in international trade are expected to prolong the tightening of monetary conditions in many countries. Also, the recent rise in some food items' global prices may create additional pressure on domestic prices in the future.
The high level of traditional export goods' exchange prices and the strengthening of exchange rates in partner countries are supporting the growth of export revenues and cross-border money transfers. This, in turn, serves to form stable supply in the domestic currency market, contributing to the reduction of inflationary pressures from the exchange rate in the coming months.
The current level of monetary conditions' tightness will ensure the moderation of credit volume growth and the continuance of high deposit growth rates. This will play a significant role in balancing gross demand and reducing the monetary factors' impact on inflation.
Taking into account the factors mentioned above, the Central Bank's Board decided to keep the key rate unchanged at 14 percent to ensure price stability. The Central Bank will ensure sufficient tightness of monetary conditions to achieve the medium-term prospect of reducing inflation to the target level of 5 percent.
In case the prospects and bases for the price-increasing pressures from gross demand and secondary effects in the economy to intensify more than expected in the coming months, a reconsideration of the tightness of monetary conditions might be possible.
