The Atyrau bridge in Kazakhstan

Kazakhstan Monetary Policy March 2021

Kazakhstan: Central Bank keeps rates unchanged in March

The National Bank of Kazakhstan (NBK) decided to keep the base rate at 9.00% at its 9 March meeting, marking the fourth 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 persistent domestic Covid-19 cases, tough restrictions in the EU threatening the external sector, and a worse-than-expected economic performance in January. The Bank stated that the upside risks to inflation—which is already well above the 4.0%–6.0% target—were high, inflation expectations were weakly anchored and the deflationary pressure from the depressed economy was likely to gradually ease, which ultimately led to the decision to hold fire.

Going forward, the Bank maintained a cautious tone, and highlighted it would take “proactive” steps to tackle inflation if needed, which hints that rate hikes are possible if inflation continues to intensify. That said, the Consensus is still for a slight decline in rates by year-end.

On the outlook, Artem Zaigrin at SOVA Capital said:

“In our view, NBK could begin to normalize its policy this year if negative scenarios such as a global economic downturn, plummeting oil prices and rising geopolitical risks do not materialize. Although we still see some room for rate cuts this year, they could only occur in 3Q21 or 4Q21, and the combined cuts could only be 50bps in total at most.”

The Bank’s next policy rate decision is scheduled for 26 April.

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