The Atyrau bridge in Kazakhstan

Kazakhstan Monetary Policy January 2022

Kazakhstan: Central Bank hikes base rate by 50 basis points in January

At its meeting in late January, the National Bank of Kazakhstan (NBK) decided to raise the base rate by 50 basis points to 10.25%, following a decision to stay put in December. Meanwhile, the corridor was kept at plus or minus 1.0 percentage point.

The decision came amid elevated price pressures, with the NBK aiming to reduce inflation to the target range of 4.0%–6.0% by the end of 2022. In addition, the hike was aimed at balancing robust fiscal support, which has driven a considerable increase in the money supply and thus exerted upward price pressure. Meanwhile, the prospect of tighter monetary policy in developed economies pressured the NBK’s move to make tenge-denominated assets more attractive to international investors.

In its forward guidance, the Bank struck a hawkish tone, referring to its disinflationary policy and the coming risks that could lead to further hikes: Inflation is still forecast to end 2022 slightly above its target, while risks stem from the expected lifting of the government’s freeze on fuel, utilities and food prices. The regulations were due to expire on 1 January but were reinstated for an additional 180 days following social unrest.

Artem Zaigrin, chief economist at Sova Capital, commented on the outlook:

“We do not rule out additional steps in March and throughout 2022 to curb inflation and inflation expectations. Tariff freezes are unlikely to lead to lower inflation in H2 2022, and the fiscal policy has been adjusted towards more social outlays to support living standards following the political turmoil earlier this month. With the 4.0%–6.0% inflation target and President Kassym-Jomart Tokayev’s proposal to bring inflation down to 3.0%–4.0% by end-2025 both in mind, we believe the NBK could end the year with a base rate of 11.00%.”

The next monetary policy meeting is scheduled to take place on 9 March.

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