Why is this important
7.8% inflation — the success of the Central Bank’s monetary policy: the strengthening of the soum reduced import prices, the high rate (14%) cooled demand. This is lower than the Central Bank’s target (8%), which allows for policy easing. However, services are rising rapidly (+14.4% per annum) due to rising salaries and non-tradeable nature. Regional disparity (from 7.1% in Jizzakh to 8.6% in Fergana) reflects local imbalances.
What happened
- Annual inflation — 7.8% in October (per month — 0.2 p.p., compared to last October — 2.4 p.p.);
- Minimum since 2017, lower than the Central Bank’s forecast (8%);
- Monthly inflation — 0.6% (as in September);
- For 10 months — 5.7% (-2 p.p. compared to last year);
- Products: +0.9% per month, +5.9% for 10 months;
- Services: +0.3% per month, +14.4% per annum.
Inflation structure
Food products:
- Monthly: +0.9%;
- For 10 months: +5.9%;
- Annual: not given (estimated to be around 7-8%).
Non-food goods:
- Monthly: +0.4%;
- Annual: +5.8%.
Services:
- Monthly: +0.3%;
- Annual: +14.4% — the fastest growth.
Slowdown drivers
Soum strengthening: the dollar exchange rate fell from 12,800 to 12,005 (6.2% since the beginning of the year). Imported goods become cheaper, reducing overall inflation.
Strict monetary policy: The Central Bank keeps the rate at 14%, cooling down demand and lending. Deposits in soums are becoming attractive, which reduces consumer spending.
Decrease in import prices: global prices for grain, oil, and industrial goods have stabilized, which reduces import inflation.
Harvest: a good grain, fruit, and vegetable harvest reduced food prices (+5.9% for 10 months against +7-8% last year).
Why services are getting more expensive faster
Services rose by 14.4% year-on-year — 2 times faster than the overall inflation rate. Reasons:
- Increase in salaries (+19% average salary to 6 million);
- Non-tradeable nature of services (barbershops, repair shops, taxis, restaurants) — does not depend on the strengthening of the sum;
- Increase in rental rates, utility tariffs;
- Shortage of qualified personnel in the service sector.
Context
Since 2017, inflation has been at 12-14% since the devaluation of the sum. The decrease to 7.8% is a historic success.
Below the Central Bank’s forecast: The Central Bank forecasted 8% inflation by the end of 2025. The fact is 7.8% in October, which gives space for further slowdown or achieving the target ahead of schedule.
Comparison with region:
- Kazakhstan: inflation is around 8-9%;
- Russia: 7-8%;
- Kyrgyzstan: 10-12%;
- Uzbekistan (7.8%) is among the leaders in inflation control.
Year-end forecast: if the trend continues, annual inflation may decrease to 7.5-7.7% by December, which is lower than the Central Bank’s target (8%). This will give the regulator arguments to lower the rate in 2026.
Regional disparity: The difference between Fergana (8.6%) and Jizzakh (7.1%) regions of 1.5 percentage points reflects local imbalances: yields, transportation costs, and consumption structure.
