The Atyrau bridge in Kazakhstan

Kazakhstan Monetary Policy December 2022

Kazakhstan: Central Bank raises its policy

At its latest meeting on 5 December, the National Bank of Kazakhstan (NBK) raised its base rate by 75 basis points to 16.75%, following its decision to increase its rate by 150 basis points to 16.00% at the end of October. Meanwhile, the interest rate corridor was kept at plus or minus 1.0 percentage points.

The NBK underlined that the rate hike was due to both domestic and external factors, including inflations continual rise through November, which pushed inflation expectations close to historic highs. Inflation accelerated to 19.6% in November from 18.8% in October: Price pressures were stoked by imported inflation—amid the ongoing reorganization of supply chains—pro-inflationary government spending, and commodity prices.

That said, the Bank did note a slowdown in month-on-month inflation increases and stated that external inflation drivers should soften due to suppressed global demand and widespread tightening of monetary conditions. It forecasts inflation to peak in Q1 2023.

As such, the NBK believes the risks to inflation are limited; it struck a dovish tone in its communiqué, arguing the probability of further tightening “in the absence of new pro-inflationary shocks […] as low”. The NBK aims to maintain the rate at the current levels for a long period of time to “stabilize inflation and gradually reduce it in the medium term”.

Looking ahead, our panel forecasts the NBK to reduce the base rate by the end of 2023 as inflationary pressures lessen.

The next monetary policy meeting is scheduled to take place on 13 January.

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