The Atyrau bridge in Kazakhstan

Kazakhstan Monetary Policy December 2020

Kazakhstan: Central Bank keeps rates unchanged in December

The National Bank of Kazakhstan (NBK) decided to keep the base rate at 9.00% at its 14 December meeting, marking the second consecutive hold, after having cut it by 50 basis points in July. However, the rate corridor was narrowed to plus or minus 1.0 percentage point from plus or minus 1.5 percentage points.

The Bank’s decision was driven by an improved international economic outlook amid rising oil prices and positive vaccine news, which reduced the imminent need for more rate cuts. In addition, high and weakly anchored inflationary pressures—inflation came in at 7.3% in November, above the Bank’s 4.0%–6.0% target—left limited room for further easing.

Going forward, the Bank struck a cautious tone, stating that it would “continue to monitor internal and external factors that affect the dynamics of inflation”. This means any rate cuts will likely be contingent on the easing of inflation. Our panelists are broadly split on the outlook, with some forecasting a rate cut next year and others seeing rates on hold. The Consensus is for a slight decline in rates.

Commenting on the outlook, Artem Zaigrin, chief economist at SOVA Capital, noted:

“NBK could keep the base rate on hold at 9%, and we see the bank monitoring inflation developments in 1Q21. We see the base rate at 8% by YE21 as inflation gradually normalizes.”

The Bank’s next policy rate decision is scheduled for 25 January.

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