Central bank keeps annual key interest rate at 14%

Central Bank decided to keep the annual key interest rate at 14 percent. The influence of fundamental monetary factors on inflation is gradually diminishing. However, the implementation of certain tariffs starting from May 1 may cause an increase in general inflation.

Current monetary and credit conditions are relatively stable, even though they approach the upper bounds of the updated inflation forecast range. Therefore, the Central Bank will maintain the key rate at 14 percent. General inflation has been decreasing since the start of the year, reaching an annual rate of 8 percent in March. Notably, food inflation has significantly declined due to lower prices in foreign food markets.

Core inflation slowed down notably to 7.6 percent annually in March, falling below year-to-date headline inflation. The updated macroeconomic forecasts now predict general inflation to range between 9-11 percent in 2024 under the main scenario.

There are strong expectations that core inflation will continue its stable downward trend and may reach 7-8 percent by year-end. The revision of the general inflation forecast is mainly due to higher than anticipated increases in regulated prices, not expected to have a significant medium-term impact on inflation due to potential reductions in consumer demand.

Updated forecasts suggest that GDP growth will range between 5.2-5.7 percent by year-end. The Central Bank is closely monitoring the balance of supply and demand in the economy, inflation expectations, and the pace of structural reforms to uphold a strict monetary policy aimed at achieving the 5% inflation target. The next Central Bank meeting to review the key rate is scheduled for June 13, 2024.