Kazakhstan: Central Bank holds fire in January
Decision meets expectations: On 17 January, the National Bank of Kazakhstan (NBK) decided to maintain the base rate at 15.25% and keep the interest-rate corridor at plus or minus 1.0 percentage point. The decision, largely priced in by markets, came on the heels of November’s 100 basis point hike and means rates remain at some of their highest levels in recent decades, albeit lower than 2022–2023’s peak levels.
Bank targets rising price pressures and weakening tenge: The Bank determined that a tight monetary policy stance was necessary to combat a recent resurgence of price pressures. Inflation rose to an eight-month high of 8.6% in December—above the NBK’s 5.0% medium-term target—amid energy tariff hikes, and, moreover, the tenge has weakened sharply recently as the U.S. dollar has strengthened and the U.S. has pursued fresh sanctions against Russia. Moreover, the Bank assessed that core inflation and inflation expectations continued to climb through January, and high-frequency data suggests that domestic demand continues to outstrip domestic supply.
Easing cycle likely to resume ahead, but upside risks to rates loom: In its communiqué, the NBK maintained a hawkish tone, indicating that it will “assess the need” for further cuts to consolidate the downward trend of inflation towards its target. In addition, the Bank pointed to rising inflationary risks associated with unanchored inflation expectations, sky-high price pressures, a depreciating currency, and fiscal stimulus.
Our panel anticipates inflation to slow in 2025 as a whole but to remain far above the NBK’s inflation target–around the midpoint of its 6.5–8.5% forecast—and as such, risks to the policy rate are skewed to the upside. Still, our Consensus is for moderate monetary policy easing ahead, with our panelists penciling in 75–250 basis points of cuts for this year.
The Bank will announce its next monetary policy decision on 7 March.
Panelist insight: Goldman Sachs’ Basak Edizgil and Clemens Grafe commented:
“We see continued pressure on inflation in the near term from FX pass-through. Moreover, Tenge-Ruble parity has been more persistent than our expectation, as the loosening of fiscal policy in Kazakhstan has brought the country’s economic cycle closer to that of Russia. And, at 575bp, the rate differential remains large. Given these and the Bank’s guidance, we think the likelihood of a rate hike in March has increased.”