Kazakhstan: Central Bank unexpectedly cuts rates in June
Rates remain high: At its meeting on 5 June, the National Bank of Kazakhstan (NBK) unexpectedly reduced its base rate by 100 basis points to 17.00%, marking the first cut since July 2024. That said, rates remain high by historical standards.
Easing inflation drives the cut: The decision came against a backdrop of easing inflation and an improved inflation outlook for the coming years, supported by the weaker-than-expected impact of VAT changes on consumer prices, as well as currency appreciation. The Bank projects inflation to continue moderating, gradually moving toward its 5.0% target by the end of the decade.
Monetary policy to remain restrictive: Despite the cut, policymakers stressed that monetary policy will need to stay moderately restrictive, and Governor Suleimenov commented that there will not be ‘drastic’ rate cuts to ensure inflation reaches single-digits in the near term and continues to move toward the Central Bank’s target. In line with this, the vast majority of our panelists see only 100 basis points of further cuts by end-year.
Panelist insight: Dmitry Dolgin, Chief Economist of the CIS region at ING, commented on the outlook: “For the next meeting, a hold is the most likely scenario in our view, unless the tenge continues to appreciate and CPI falls below 10% YoY in the near term. There are several reasons for caution. First, the pickup in global inflationary pressures has already started to feed into higher PPI in Kazakhstan […]. Second, tenge dynamics remain volatile. […] Third, domestic pro-inflationary risks remain in place, especially those linked to quasi-fiscal stimulus and the eventual unfreezing of utility tariffs, as reiterated by the NBK. Finally, the current NBK guidance is explicitly more data-driven than last month’s wording”.