Kazakhstan Monetary Policy November 2016


Kazakhstan: NBK cuts rates in final 2016 meeting and signals cautious approach to further cuts

November 14, 2016

At its first monetary policy meeting of the year, held on 9 January, the National Bank of Kazakhstan (NBK) announced its decision to leave the one-day repo rate—also known as the base rate—unchanged at 12.00%, following a further 50 basis-point cut in December. The Bank’s decision was in line with market expectations, given the Authority’s guidance last year that it will take a more “cautious approach” to further reductions in the monetary policy rate. Nonetheless, the Bank recognized that further easing of monetary policy is likely if the country's economic situation improves, a trend which is corroborated by macroeconomic data.

In its communiqué, the Central Bank signaled that although inflation exceeded the upper limit of its target range of 6%–8% at the end of 2016, it expects it to fall within the target range in the first two months of this year. In addition, the Bank commented that it does not see inflation reducing significantly in the coming months, but toward the end of 2017, it should fall to “within the limits of 7.3-7.7%”. The Bank’s inflation projection this year is supported by recent data that households’ inflation expectations are falling and the tenge is showing signs of strengthening.

In terms of risk, the Central Bank warned that external threats are still looming on the horizon. These risks may come in the form of vulnerabilities in the oil market and the pace of recovery of Kazakhstan’s main trade partners, particularly Russia. Domestically, the Bank raised a red flag by pointing out that the government’s plan to increase budget expenditures has the potential to fuel inflation this year. Consequently, the Bank adopted a wait-and-see approach and decided to stay put at its first meeting of the year. The next monetary policy meeting is scheduled for 20 February.

The Consensus view among the analysts we surveyed is that the Central Bank will continue easing its monetary stance this year. FocusEconomics Consensus Forecast panelists see the base rate ending this year at 9.33%. Going forward, the Central Bank should continue trimming the interest rate, and our panelists see the rate ending 2018 at

Author:, Senior Economist

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Kazakhstan Monetary Policy Chart

Kazakhstan Monetary Policy November 2016

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

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