Kazakhstan Monetary Policy June 2016


Kazakhstan: Central Bank leaves interest rates unchanged in June

June 6, 2016

At its 6 June monetary policy meeting, the National bank of Kazakhstan (NBK) decided to leave the one-day repo rate—also known as the base rate—unchanged at 15.00%. The decision follows an unexpected 200-basis-point cut in May. The Central Bank also communicated that it had decided to leave the standing facilities—one to provide liquidity and the other to withdraw it—unchanged with a symmetric interest rate corridor of 1.0 percentage points.

The NBK said that its decision not to alter interest rates this month reflects the Bank’s view that the balance of risks between price stability and financial stability continued to improve. Monetary authorities also commented that the current inflation level remains within the Bank’s expected trend and that inflation expectations are broadly unchanged since the last decision on interest rates in May. The NBK added that households and businesses continue to sell foreign currency and that, at the end of April, foreign currency deposits in the banking system had continued to decrease.

Regarding the economy, the Central Bank recognized that a deterioration in domestic demand weighed heavily on growth at the beginning of this year, with GDP contracting in the first quarter. Growth is expected to remain weak in the second quarter as a decrease in industrial production deepened further in April. The Bank underlined that domestic and external risks persist, which may negatively affect the exchange rate, the country’s money market, as well as inflation expectations. Should the aforementioned risks recede in the coming months, the Bank stated, a further cut in the monetary policy rate will not be ruled out. The size of the cut, nonetheless, will depend on the economy’s response to these domestic and external shocks. The next monetary policy meeting is scheduled for 11 July.

FocusEconomics Consensus Forecast panelists expect the Bank to cut interest rates later in the year and see the base rate ending 2016 at 11.44%. For 2017, the panel sees the base rate ending the year at 8.43%.

Author:, Senior Economist

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Kazakhstan Monetary Policy Chart

Kazakhstan Monetary Policy June 2016

Note: NBK refinancing rate in %.
Source: National Bank of Kazakhstan (NBK).

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