The Central Bank kept the key interest rate at 14% per annum: reasons and economic context

On June 12, 2025, the Board of the Central Bank decided to keep the main interest rate unchanged at 14% per annum. The regulator noted that the current rate provides the necessary rigidity of monetary conditions in the face of continuing inflationary pressure.

According to the Central Bank's analytical materials, aggregate demand has been growing since the beginning of 2025, accompanied by increased economic activity and a steady increase in core inflation. Despite the decline in the overall inflation rate in May to 8.7% in annual terms, inflation expectations among the population and entrepreneurs remain at an elevated level and are formed above the actual indicators.

According to the regulator, core inflation in May was 8.5% per annum, which is due to the continued increase in prices in the service sector. In addition, the economy is beginning to experience secondary effects of higher energy prices, which increases the likelihood of a longer period of inflationary pressure.

The Central Bank also records high rates of economic activity in the first five months of this year. The increase in trade revenues, growth in paid services, increased cross-border money transfers, expansion of interbank transactions and an increase in the number of real estate transactions indicate a revival in domestic demand.

Additional pressure on prices is exerted by the continued growth of lending and expansion of budget expenditures. These processes support the dynamics of aggregate demand and present a potential inflationary risk over the next few quarters.

The external economic environment also remains a source of uncertainty. Rising global prices for selected food groups and ongoing global trade tensions may increase domestic inflationary risks. At the same time, the strengthening of the currencies of trading partner countries and stable prices for export goods contribute to the growth of export earnings and cross — border transfers, which supports the supply of foreign currency in the domestic market and reduces pressure on the exchange rate.

In the face of continuing risks, the Central Bank intends to maintain the current level of monetary policy rigidity in order to achieve its stated inflation target of 5% in the medium term. The regulator also allows for the possibility of adjusting policy parameters if inflationary pressure from domestic demand and secondary factors exceeds the forecast values in the coming months.

The next meeting of the Central Bank's board on the main interest rate is scheduled for July 24, 2025.