Kazakhstan Monetary Policy March 2016

Kazakhstan

Kazakhstan: National Bank of Kazakhstan leaves interest rate unchanged in March

March 14, 2016

At its 14 March monetary policy meeting, the National Bank of Kazakhstan (NBK) decided to leave the one-day repo rate unchanged at 17.00%. The Bank’s decision followed a 100-basis-point increase in the rate in February. The NBK has raised the one-day repo rate by 500 basis points since the Bank introduced it in September 2015. The Central Bank also kept on hold the standing facilities—one to provide liquidity and the other to withdraw it—with a symmetric interest rate corridor of plus/minus 2.0 percentage points.

In its statement, the Bank pointed out that the decision is a continuation of its commitment to improve monetary policy and achieve its primary tasks, which are price stability and stability in financial markets, taking into consideration the country’s macroeconomic outlook. The Bank added that, “keeping the base rate at the same level in terms of economic slowdown indicates the necessity to ensure the demand for tenge assets.”

The NBK stated that in past weeks there had been a stabilization in the preference for national currency from depositors and thus dollarization of bank deposits “has stopped”. Moreover, the Bank underlined that it will continue to influence the attractiveness of assets denominated in tenge as it seeks to change citizens’ preferences in favor of the national currency.

In the wake of the new free-floating regime and due to a plunge in oil prices in January, the tenge hit a record low against the U.S. dollar in late January. However, the tenge has stabilized in recent weeks due the Central Bank’s policy response and an incipient rally in oil prices. Nonetheless, the NBK recognized that inflation continued to accelerate in February. The Central Bank expects inflation to decelerate in the second half of the year and to reach the upper boundary of its target range of between 6.0% and 8.0% at the end of year.

FocusEconomics Consensus Forecast panelists expect the Bank to cut interest rates later in the year and see the base rate ending 2016 at 11.06%. For 2017, the panel sees the base rate ending the year at 9.43%.


Author:, Senior Economist

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Kazakhstan Monetary Policy March 2016

Note: NBK refinancing rate in %.
Source: National Bank of Kazakhstan (NBK).


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