Kazakhstan: NBK cuts rates in October and signals further easing
October 3, 2016
The National Bank of Kazakhstan announced a decision to cut the one-day repo rate—also known as the base rate—by 50 basis points to 12.50% at its 3 October meeting. The decision took the markets by surprise as they had expected no change. According to the Central Bank, the cut in the main policy rate “reflects positive trends in the key segments of the external market, as well as a stable situation in the domestic financial market.” The monetary authority signaled that it will continue reducing interest rates, if inflation approaches the Bank’s target range of 6%–8% and financial stability continues.
Inflation has been declining rapidly in the past two months and the Central Bank expects it to fall even more rapidly between October and November. It forecasts that inflation will end this year just above the 6%–8% target and that it will end 2017 within the target, in the absence of upward risks to inflation. Expectations of a further weakening of the tenge against other major currencies also continued to decline in September, according to the monetary authority. Regarding economic activity, the Central Bank stated that the economy is gradually adapting to new external conditions—low commodities prices and weak external demand—and low exchange rate volatility.
The Bank stated that a further cut in the main monetary policy rate will depend on the evolution of inflation, the exchange rate and inflation expectations. The next policy meeting is scheduled for 14 November.
Author: Ricardo Aceves, Senior Economist