Page 76 - bneMag Dec22

76 I Eurasia bne December 2022
The governors of the central banks in Central Asia and the Caucasus are battling inflation with mixed results. / bne IntelliNews
Eurasian central bank governors battling inflation with mixed success
Compared to the rest of the region, the Uzbek regulator has done a good job of controlling inflation, which fell from an artificial pre-reform rate of about 14% to a low of 10%, but rose again to the current 12.2% during the current crisis period.
The Uzbek central bank responded to the burgeoning inflation in the first quarter of this year with a sharp rate hike to
17% that effectively prevented inflation gathering momentum and allowed it to ease the prime rate again to the current 15% in July that has left the effective real interest rates at a positive 2.7%.
“Inflation targeting is still very new
and we are still building a track record with the population,” Nurmuratov said during a plenary session at the forum in Samarkand on November 5.
The CBU has set an inflation target of 5%, but hit by multiple shocks the plan has been thrown off track. In response, the CBU has set an intermediate and more realistic short-term inflation goal of 10% in order to continue to build its creditability with the population, “but of course it is not easy to do so in the current conditions.”
The CBU has been actively reaching out to the population with a social media campaign to explain its policies and establish a relationship. At the same time, the central bank has been invest- ing into talent, hiring the best-in-class young economists, as well as build-
ing up its analytical skills to improve forecasting.
Ben Aris in Samarkand
Inflation appears to be under control in Uzbekistan and to have peaked
in Georgia and Armenia, but with prices still rising in Kazakhstan the regulator is ready to raise rates “as much as necessary,” the governors of the central banks of Uzbekistan, Kazakh- stan, Georgia and Armenia told bne IntelliNews during the Uzbek economic forum in Samarkand on November 4.
Uzbekistan new at the game
Georgia and Kazakhstan were both much quicker to liberalise their monetary policy and are at least a decade ahead of Uzbekistan, which was closed to change under the former president, Islam Karimov. Armenia too was fast to react to mounting inflation pressures and began hiking rates much earlier than most of its peers in December 2020. Now the central bank in Yerevan is reaping the benefits
as the country boasts a real interest rate of 1%, unlike many of its peers, as the regulator has got ahead of the curve.
Today Uzbekistan is probably the least well equipped to deal with spiking inflation as it only started to introduce inflation rate targeting in 2016 after
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President Shavkat Mirziyoyev took over and introduced a comprehensive monetary policies at the Central Bank of Uzbekistan (CBU).
Since then, the regulator has been working on building creditability amongst the population as the regulator had never attempted to anchor inflation rate expectations before. CBU Governor Mamarizo Nurmuratov says consider- able progress has been made, but a lot more work needs to be done.
Uzbekistan monetary policy rate vs CPI inflation y/y
Source: Central bank of Uzbekistan