The Atyrau bridge in Kazakhstan

Kazakhstan Monetary Policy March 2022

Kazakhstan: Central bank stands pat in March

At its latest meeting on 9 March, the National Bank of Kazakhstan (NBK) decided to keep the base rate at 13.50%, following its decision to hike the rate by 325 basis points in late February. Meanwhile, the corridor was kept at plus or minus 1.0 percentage point.

The decision was largely justified by the significant rate raise undertaken in late February to mitigate increased geopolitical risks, the effects of which are not yet clear. Meanwhile, inflation intensified in February, and the tenge had fallen to 521 per USD by 9 March, which was down 22.0% from the same day in February, and down 24.0% from the same day last year.

Looking ahead, the bank reiterated its full commitment to contain inflation, which is suffering tremendous external pressure from the latest fall of the tenge. The Bank is still likely weighing the impact of the last decision, and may further tighten policy if the currency does not stabilize.

Although most of our panel predicts policy easing towards the end of the year, Artem Zaigrin, chief economist at SOVA Capital, sees further tightening as an option:

“Mitigating the risk from balance of payments with a stronger currency vs. its major trading partners could lead to a shock similar to when the KZT/RUB rate strengthened to 2.65 vs. nearly 5.5 in early 2015. Going forward, much will depend on the geopolitical risks related to Russia, as they might result in a further adjustment of the exchange rate (towards a KZT/USD rate of 600-650) to balance imports and exports despite even higher commodity prices. In the base case, we assume an additional tightening […] depending on the duration of Russia-related risks.”

The next monetary policy meeting is scheduled to take place on 24 April. That said, heightened geopolitical uncertainty could lead to further extraordinary meetings.

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