Central Bank keeps key rate unchanged at 13.5% amidst inflation concerns

The Central Bank has announced its decision to keep the key interest rate unchanged at 13.5% per annum, citing the need to maintain relatively tight monetary policy conditions to further curb inflation. The decision was based on macroeconomic forecasts and inflationary expectations, according to the Central Bank’s press release.

In September, the annual inflation rate stood at 10.5%, holding steady throughout the last quarter. However, core inflation has shown an upward trend, driven by strong consumer demand, price increases in fuel and certain food products, and adjustments in service tariffs. This core inflation rate reached 7.1% annually as of September.

Despite rising prices in some areas, the Central Bank noted a reduction in average fruit and vegetable prices, which has helped alleviate overall inflation pressures. Weekly data from October also indicate relative stability in consumer goods prices, with monthly price changes lower than those observed in the same period last year.

Looking ahead, the Central Bank expects inflationary pressures to ease modestly in the final quarter of this year, supported by its current tight monetary policy. By year-end, the overall inflation rate is forecasted to reach approximately 9.5%.

Economic growth has also shown positive momentum, with a real GDP increase of 6.6% from January to September, driven primarily by high levels of investment and growth across major economic sectors. Cross-border money transfers have surged compared to last year, boosting household incomes and supporting consumer activity. Notably, the service and retail trade sectors have experienced robust growth, underscoring strong consumer demand.

For 2024, GDP growth is projected to range between 6.0% and 6.5%, though the Central Bank warned of potential pro-inflationary risks stemming from energy supply issues, short-term price fluctuations, and persistently high service costs.

“Regardless of conditions, the Central Bank will continue its monetary policy to achieve a 5% inflation target, with a focus on balancing economic supply and demand, inflation expectations, and the pace of structural reforms,” the Central Bank stated.