Kazakhstan Interest Rate

Central Bank unexpectedly cuts rates in June

Rates remain high: At its meeting on 5 June, the National Bank of Kazakhstan (NBK) unexpectedly reduced its base rate by 100 basis points to 17.00%, marking the first cut since July 2024. That said, rates remain high by historical standards.

Easing inflation drives the cut: The decision came against a backdrop of easing inflation and an improved inflation outlook for the coming years, supported by the weaker-than-expected impact of VAT changes on consumer prices, as well as currency appreciation. The Bank projects inflation to continue moderating, gradually moving toward its 5.0% target by the end of the decade. Despite a recent rate cut, policymakers stressed that monetary policy will need to stay moderately restrictive, and Governor Suleimenov commented that there will not be 'drastic' rate cuts to ensure inflation reaches single-digits in the near term and continues to move toward the Central Bank’s target.

Panelist insight: Commenting on the outlook, Basak Edizgil and Clemens Grafe, analysts at Goldman Sachs, stated: “We think the size of today’s rate cut and our expectation for elevated inflation in June on the back of utility tariff hikes imply that the NBK will likely remain on hold at its next policy meeting on 24 July. We expect the Bank to approach rate cuts with more caution in the remainder of the year and the policy rate to fall to 15.50% by year-end.” Emerging Market Watch analysts added: “Nevertheless, the NBK downgraded its year-end inflation forecast to 9-11% (from 9.5-11%). In addition, it said the aim is to reach the lower end of this range. In this context, it would be even more surprising if the bank implements another rate cut in July. June's CPI rate would have to be significantly lower alongside favourable external developments. At this stage, we believe the recent 100bps cut came rather pre-emptively and the NBK will wait before continuing the easing cycle.”

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