The Atyrau bridge in Kazakhstan

Kazakhstan Monetary Policy September 2018

Kazakhstan: Central Bank keeps the base rate on hold in September

At its 3 September monetary policy meeting, the National Bank of Kazakhstan left the base rate unchanged at 9.00%, with a corridor of plus or minus 1.0%.

The Bank held the rate steady amid continued solid expansion in economic activity and within-target inflation. In August, inflation inched up from July’s 5.9% to 6.0%, hitting the midpoint of the Bank’s target range of 5.0%–7.0%. Non-food inflation increased by the biggest magnitude, while paid services saw the smallest rise in prices. Inflation expectations continue to trend downwards. Meanwhile, economic activity grew 4.9% year-on-year in the January–July period, powered by the mining, manufacturing, transportation, communications, and trade 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 the move by the U.S. Federal Reserve to normalize monetary policy have led to an outflow of capital from emerging-market economies and weakened their currencies, including the tenge.

While the Bank stated that monetary conditions sit “close to neutral levels”, it noted that monetary policy may be tightened further before the end of the year against the backdrop of a weaker tenge and slower-than-expected deceleration of inflation.. The next monetary policy meeting is scheduled for 15 October 2018.

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