The Atyrau bridge in Kazakhstan

Kazakhstan Monetary Policy July 2018

Kazakhstan: Central Bank holds the base rate steady in July

At its 9 July monetary policy meeting, the National Bank of Kazakhstan kept the base rate unchanged at 9.00%, with a corridor of plus or minus 1.0%, putting an end to the easing cycle that preceded the decision to hold fire.

The Bank opted to keep the rate on hold given the downward trend in inflation since March. Inflation fell to an over three-year low of 5.9% in June (May: 6.2%), due to the impact of favorable seasonal factors on agricultural output, coupled with reduced prices for consumer goods. The slide in inflation over the last four months came despite the climb in global oil prices and buoyant domestic economic activity. In January–May, activity grew 4.9% compared to the same period of the previous year, aided by the upturn in oil prices and thanks to growth in the manufacturing, communications, trade, transportation and agricultural sectors.

Higher demand from both domestic and overseas markets, along with an expected rise in inflation in Kazakhstan’s main trade partners, should push up price pressures going forward. Furthermore, tighter global financial conditions stemming from rising interest rates in the United States have led to an outflow of capital from emerging market economies and put downward pressure on the tenge.

While the Bank stated that monetary conditions “remain neutral”, it noted the persistence of upside risks to inflation in the short- and medium-term, emanating from external conditions and a supportive fiscal policy, have constrained the space to further ease monetary policy this year. The next monetary policy meeting is scheduled for 3 September 2018.

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