National Bank of Kazakhstan resumes monetary policy loosening in May

At its meeting on 31 May, the National Bank of Kazakhstan (NBK) resumed its monetary policy loosening cycle, cutting the policy rate by 25 basis points to 14.50%, while keeping the interest-rate corridor at plus or minus 1.0 percentage point. The cut had been largely priced in by markets and came on the heels of a hold in April; the NBK has now lowered rates by 225 basis points cumulatively since August 2023.

The move to cut was motivated by a recent fall in price pressures: Inflation decreased to an over two-year low of 8.7% in April—aligning with the Bank’s forecast—owing largely to a slowdown in core inflation. Moreover, the external inflationary backdrop has improved, limiting upside risks to the outlook. That said, the NBK noted that inflation expectations rose in May due to utility services reforms, and fiscal stimulus measures in response to the severe floods that hit the economy in late March. These developments likely led the Bank to cut only cautiously. Regarding activity, the NBK kept its GDP growth forecast for 2024 unchanged at 3.5–4.5%, while adjusting the 2025 and 2026 projections to 4.8–5.8% and 4.9–5.9%, respectively, in light of the recent postponement of an expansion project involving the national oil firm.

In its communiqué, the Central Bank was more dovish than in prior meetings, stating that a steady slowdown in core inflation could give it room to continue cautiously cutting rates. That said, the NBK reaffirmed that achieving the 5.00% inflation target in the medium term requires maintaining tight monetary policy for longer. Our panelists expect 50–250 basis points worth of further cuts by end-2024. The NBK’s next decision will be announced on 12 July.

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