National Bank of Kazakhstan extends easing-cycle pause in October

Second consecutive hold meets market expectations: At its meeting on 11 October, the National Bank of Kazakhstan (NBK) decided to maintain the base rate at 14.25% and keep the interest-rate corridor at plus or minus 1.0 percentage point. The hold had been priced in by markets and mirrored August’s decision; the NBK had previously lowered rates by a cumulative 2.5 percentage points since August 2023.

Rising inflationary pressures dissuade cut: The Bank determined that moderately tight monetary conditions are required to return inflation to its 5.0% medium-term target. Despite a gradual decline in August and September, inflation remained significantly above target in September at 8.3%. The NBK attributed this to persistent inflationary pressure stemming from fiscal stimulus, rising utility tariffs and robust domestic demand. The Bank also highlighted rising production and agricultural prices, as well as a weaker tenge fueling imported inflation. Moreover, the NBK noted that inflation expectations rose in September and that the balance of risks to the inflation outlook is now tilted to the upside.

Further cuts expected this year and next: In its communiqué, the Central Bank was more dovish than in its prior meeting, indicating that a steady decrease in core inflation, along with an effective solution to financing the fiscal gap, will create the conditions for cautious cuts going forward. A majority of our panelists have penciled in further cuts by year-end, and all of them expect the easing cycle to continue in 2025; the NBK is expected to reduce the base rate by around 275 basis points by end-2025. The Bank will announce its next monetary policy decision on 29 November.

Panelist insight: Goldman Sachs’ Basak Edizgil and Clemens Grafe commented: “We continue to forecast the NBK to remain on hold for the remainder of the year as we expect the government to hike budget transfers (along with other revisions to the budget programme) and core momentum to remain high.”

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