The Atyrau bridge in Kazakhstan

Kazakhstan Monetary Policy December 2021

Kazakhstan: Central Bank keeps base rate on hold in December

At its meeting in early December, the National Bank of Kazakhstan (NBK) decided to maintain the base rate at 9.75%, after delivering three consecutive hikes between July and October. Meanwhile, the corridor was kept at plus or minus 1.0 percentage point.

The decision came amid a slowdown in inflation, as well as rising risks to the global economic recovery due to the emergence of the Omicron strain of Covid-19. Both the services and manufacturing PMIs fell into contractionary territory in November, pointing to a slowing domestic economy and likely discouraging the Bank from delivering an additional hike.

The Bank maintained a hawkish tone in its forward guidance, stressing that it intends to continue tightening policy, with inflation dynamics and the impact of the health situation on the economy remaining key factors to watch. That said, most panelists see the Bank keeping the base rate at its current level until the end of 2022.

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

“External pressures are likely to increase, as the price environment in Kazakhstan’s main trading partners (Russia and the EU) continued to deteriorate in October and November, and supply disruptions remain. The accommodative fiscal stance and rapid rebound could interfere with the NBK’s expectations of a slowdown in inflation in 2022. […] The difficulty around restoring supply chains could make inflation fall slower than expected. As a result, we think the NBK could raise the base rate by 25bps in Q1 2022 if there are more concerns around food inflation amid rising non-food and services inflation.”

The next monetary policy meeting is scheduled to take place on 24 January 2022.

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