of November 18, 2019 No. UP-5877
About enhancement of monetary policy with phased transition on the mode of inflation targeting
Key factor of ensuring efficiency of the economic reforms directed to increase in level of living of the population and creation of conditions of strong growth of economy is implementation of measures for further decrease in the rate of inflation.
The international experience shows that in the conditions of market economy one of effective methods of carrying out monetary policy is the mode of inflation targeting in case of which by means of active role of Central Bank in the monetary market, and also the regular analysis of development of economy and extended coverage of plans of state policy achievement of the established quantitative purpose on inflation is provided.
At the same time implementation of the mode of inflation targeting demands from the Central bank and the Cabinet of Ministers of the Republic of Uzbekistan of the coordinated preparatory work directed on:
gradual decrease in role of not monetary factors of inflation, including reforming of tariff regulation, ensuring efficiency of structural economic reforms in real production sector, saturation of the domestic market by consumer goods;
improvement of quality of the macroeconomic analysis and communication policy of the Central bank;
implementation of new instruments of regulation in the money market, capable to provide effective impact on the credit market.
For the purpose of expansion of use of market mechanisms and instruments of economic regulation for ensuring macroeconomic stability, and also cardinal increase in efficiency of monetary policy:
1. To provide to Central Bank of the Republic of Uzbekistan since January 1, 2020 step-by-step transfer of mechanisms of monetary policy to the mode of inflation targeting with establishment of the purpose of decrease of the inflation rate to 10% in 2021 and the permanent purpose (target) on inflation at the level of 5% in 2023.
2. Determine the basic principles of monetary policy of the Central bank of the Republic of Uzbekistan:
establishment of the permanent purpose on inflation with finishing it to the general public;
application of wide range of instruments of monetary policy for interest rate adjustment in the money market and managements of inflationary tendencies;
carrying out the detailed macroeconomic analysis and forecasting taking into account available information on internal and the foreign markets for adoption of objective decisions in the field of monetary policy;
enhancement of communication policy of the Central bank of the Republic of Uzbekistan for explanation of the general public of the purposes of monetary policy, providing predictable macroeconomic situation and forming of trust of participants of the market.
3. To provide to the Cabinet of Ministers and the Central bank of the Republic of Uzbekistan realization of package of measures for creation of conditions for complete transition to the mode of inflation targeting, including:
carrying out the coordinated monetary and fiscal and antimonopoly policy;
continuation of realization of structural transformations in economy industries with acceleration of transition to competitive market economy, increase in competitiveness of local producers and forming of full commodity markets and services;
the consecutive liberalization of regulated prices directed to transition to modern methods of anti-monopoly and price regulation, and also expansion of production infrastructure;
reforming of bank system, and also the financial markets for the purpose of development of institutes of financial intermediation for transformation of savings in investments and possibility of long-term planning of financial flows.
The concept of collateral actions of the Cabinet of Ministers and Central bank of the Republic of Uzbekistan on decrease of the inflation rate and ensuring price stability (further - the Concept) according to appendix No. 1;
"Road map" of decrease of the inflation rate and ensuring price stability for 2020 (further - "Road map") according to appendix No. 2.
5. To Central Bank of the Republic of Uzbekistan to take measures for reduction of tools, mechanisms and procedures of monetary policy in compliance with standards of the mode of inflation targeting by implementation:
till January 1, 2020 the market instruments of impact on interest rates of the money market including bonds of the Central bank, overnight deposits, regular deposit auctions, credit auctions and overnight credits on the security of government securities and foreign currency;
during 2020 derivative management tools interest and currency risks (swaps, options, futures) and step-by-step strengthening of role of commercial banks in forming of the currency rate;
in a month the mechanism of percentage corridor of key (main) interest rate for carrying out flexible percentage policy with regular central bank interventions in the interbank money market;
till April 1, 2020 systems of the macroeconomic analysis and forecasting according to the advanced international practice providing development of tools of econometric modeling with technical assistance of the international financial institutions;
in the two-month time of the modern principles of the communication policy providing timely lighting from the Central bank of the current situation in economy, key factors of inflationary tendencies and measures of monetary policy;
regular researches of factors of inflation and inflation expectations, studying of the best foreign practices with attraction of technical assistance of the international financial institutions and Central Banks of other countries.
6. Form the Commission on coordination of measures for decrease in the rate of inflation and ensuring price stability (further - the Commission) in structure according to appendix No. 3.
Determine the main objectives of the Commission:
implementation of the analysis and critical evaluation, is direct with departure on places, the factors of inflation and the reasons leading to increase in prices;
concentration of efforts of all ministries and departments on decrease in the rate of inflation in the economy and ensuring coordination which are carried out the politician;
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