THE IMPACT OF THE GAP BETWEEN HEADLINE AND FELT INFLATION ON THE EFFECTIVENESS OF INFLATION TARGETING IN UZBEKISTAN

Abstrak

This thesis analyzes the economic implications of the gap between official headline inflation indicators and the “felt inflation” actually experienced by households under the inflation targeting regime in Uzbekistan. The study demonstrates that low-income households experience a higher actual inflation rate than the aggregate Consumer Price Index (CPI) because food products constitute a significantly larger share of their consumption basket. In the case of Uzbekistan, the high volatility of food inflation and the fact that food expenditures account for up to 69 percent of the minimum consumption basket are identified as the main factors intensifying the felt inflation gap. The findings suggest that inflation targeting policies should take into account inflation indicators differentiated by income groups. Furthermore, the study develops scientific and practical recommendations aimed at improving central bank communication, constructing separate inflation indices for different income groups, and strengthening coordination between monetary and fiscal policy.