The BOD of the Central Bank, at its meeting today, decided to keep monetary background “in a relatively tight phase” and keep the interest rate unchanged at 14% in order to limit the impact of changes in energy prices on inflation expectations, the Bank said in a statement.
Given the inflation risks in the economy from high aggregate demand and secondary effects, the Central Bank will take measures to maintain a sufficient level of real positive interest rates to reduce inflation to 5% of the target over the forecast horizon, the statement added.
In May, overall inflation accelerated due to rising energy prices for households and reached 10.6% in annual terms. Excluding the impact of energy prices, the inflation rate was 6.8% due to a significant seasonal decline in food inflation.
“Inflation expectations of individuals and businesses in April rose to 14% and 13.3%, respectively, amid discussions of changes in energy tariffs and the abolition of some tax benefits. In May, the population's expectations remained unchanged at 14%, while the expectations of entrepreneurs dropped to 12.7%. While, the impact of price changes on inflation expectations is lower than initial estimates,” the statement concluded.
