The Atyrau bridge in Kazakhstan

Kazakhstan Monetary Policy January 2021

Kazakhstan: Central Bank keeps rates unchanged in January

The National Bank of Kazakhstan (NBK) decided to keep the base rate at 9.00% at its 25 January meeting, marking the third consecutive hold, after having cut it by 50 basis points in July 2020. Moreover, the rate corridor was kept at plus or minus 1.0 percentage point.

The Bank’s decision came despite the pandemic continuing to spark uncertainty, amid increases in domestic Covid-19 cases and the recent imposition of tougher restrictions in the EU, which could harm the external sector. However, the need to contain inflation—which has risen in recent months—and bring it back to the target band of 4–6%, as well as the threat of downward pressure on the tenge, did not leave any room for further cuts.

Going forward, the Bank struck a cautious tone, stating it would mainly consider “the actual dynamics of inflation” in its next decisions regarding the base rate. In short, it seems that the Bank will continue to prioritize price stability, and as such, if inflation is brought down closer to the target, the Bank could cut rates to spur activity.

On the outlook, Artem Zaigrin at SOVA Capital said:

“Passing the inflation spike could pave the way for NBK to cut rates starting from 2Q21. The dissipation of geopolitical risks could push the KZT/$ rate to 410 by YE21, we think.”

The Bank’s next policy rate decision is scheduled for 9 March.

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