Central Bank of Uzbekistan may switch to inflation targeting by year end

The Central Bank of Uzbekistan may switch to inflation targeting in the fourth quarter of 2019, follows from the draft presidential decree published on the portal of discussing draft normative-legal acts.

It is planned to transfer the conditions of the state monetary policy to the inflation targeting regime with the establishment of a constant target for inflation from 2023 at the level of 5%, an intermediate goal in 2021 at a level below 10%.
 
In accordance with the document, the CB is instructed to take, by December 1, 2019, necessary measures to bring the instruments, mechanisms and procedures of the monetary policy in line with the standards of the inflation targeting regime, updating the system of interest-bearing instruments.

Monetary policy will be implemented on the basis of the need to comply with the established target by effectively managing money market rates, timely transmitting the correct impulses to the markets through the interest channel of the transmission mechanism of monetary policy.

In addition, the document says that in the inflation targeting mode, price stability also supports financial stability, since the actions of monetary policy are predictable and understandable for market participants. Economic agents become more consistent in the decision-making process, which helps to eliminate the elements of uncertainty and stabilize the entire financial system with minimal CB participation.