The Atyrau bridge in Kazakhstan

Kazakhstan Monetary Policy February 2022

Kazakhstan: Central Bank hikes base rate significantly in February to support the tenge

At an extraordinary meeting on 24 February, the National Bank of Kazakhstan (NBK) decided to raise the base rate by 325 basis points to 13.50%, following its decision to raise rates in January. Meanwhile, the corridor was kept at plus or minus 1.0 percentage point.

The unexpected decision followed Russia’s invasion of Ukraine. The Bank anticipated that the ruble’s collapse—fueled by Western sanctions on major Russian banks—would cause a spillover effect on the tenge. According to the Bank, risks stemming from the war justified an anti-crisis measure.

In its forward guidance, the Bank announced it would intervene in foreign exchange markets to avoid volatility of the tenge, and mentioned already-sizeable interventions in the week leading to the decision. Higher electricity prices, which translate into higher inflation, a prolonged conflict in Ukraine, and secondary effects of sanctions on Russia will maintain pressure on the currency. An extremely unfavorable external environment suggests that the Bank’s options are skewed towards tightening.

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

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