The Atyrau bridge in Kazakhstan

Kazakhstan Monetary Policy October 2018

Kazakhstan: Central Bank raises interest rates amid growing inflationary pressures and exchange rate volatility

At its 15 October monetary policy meeting, the National Bank of Kazakhstan opted to raise the base rate by 25 basis points to 9.25%, with an interest rate corridor of plus and minus 1.0 percentage point. The rate hike follows four months of stable monetary policy, when the rate was held at 9.00%.

Rising inflation, along with greater uncertainty over inflation expectations and growing volatility in the tenge, prompted the Bank to raise the key interest rate in October. Inflation has trended upwards on higher fuel and food prices, rising to 6.1% in September (August: 6.0%) and inching closer to the upper limit of the Bank’s 5.0%–7.0% target band. Expectations climbed in tandem as the tenge depreciated amid the wider selloff in emerging-market currencies owing to the U.S. Federal Reserve’s tightening cycle. The decision to increase interest rates comes against the backdrop of strengthening economic activity, thanks to the upturn in oil prices and higher private consumption supported by rising incomes.

In terms of forward guidance, the Bank stated that the current rate would help to lift the tenge and keep monetary conditions close to neutral levels. The Bank, however, did not rule out the possibility of raising the rate again and stated that doing so would depend on the trajectory of inflation and expectations in relation to the target band. The next monetary policy meeting is scheduled for 3 December.

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