The Atyrau bridge in Kazakhstan

Kazakhstan Monetary Policy February 2020

Kazakhstan: Central Bank stands pat in February but hints at a dovish turn

At its latest monetary policy meeting on 3 February, the National Bank of Kazakhstan left the base rate at 9.25%, keeping an interest rate corridor of plus or minus 1.0 percentage point. The decision marks the third consecutive time the Bank has held the base rate steady since hiking rates by 25 basis points in September.

Within-target inflation, moderate inflation expectations and upbeat economic growth in the final quarter of last year prompted the Bank’s decision to stand pat. Although inflation edged up to 5.6% in January amid quickening price increases for non-food items and paid services, it remained within the 4.0%–6.0% target corridor. In addition, household inflation expectations moderated to 5.6% in December from 5.8% in November. Meanwhile, the short-term economic indicator—a proxy for GDP growth—rose to 5.0% year-on-year in December (November: +4.7% year-on-year), a 14-month high, suggesting robust growth in Q4 2019.

Looking ahead, the Bank hinted at easing monetary conditions provided the trajectory of inflation remains within expectations. While inflation is projected to rise in the short-term due to the increase in excises for gasoline sales and higher prices for regulated services, price pressures are expected to gradually weaken and fall below the midpoint of the target corridor by the end of the year. Nevertheless, the outlook for inflation hinges on successful government action to tame food inflation, by boosting competition, and conduct an optimal tariff policy.

The next meeting is scheduled for 16 March.

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