National Bank of Kazakhstan cuts rates in July

At its meeting on 12 July, the National Bank of Kazakhstan (NBK) reduced the base rate by 25 basis points to 14.25%, 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 same-sized cut in May; the NBK has now lowered rates by 250 basis points cumulatively since August 2023.

The cut was motivated by a continued gradual decline in price pressures: Inflation fell to 8.4% in May and was unchanged in June—coming in below the midpoint of the Bank’s forecasts. Moreover, inflation expectations decreased from April’s high in May, despite rising slightly in June amid currency weakness. That said, the NBK noted that inflationary pressures persist due to fiscal stimulus and the reform of regulated prices. Moreover, the Bank said that the external inflationary backdrop has deteriorated amid rising global food prices and faster inflation in Russia; these factors likely dissuaded a larger-sized cut.

In its communiqué, the Central Bank was more hawkish than in its prior meeting amid persistent upside risks to the inflationary outlook. The NBK stated that it plans to maintain “moderately tight monetary conditions for a longer time” in order to reach its inflation target of 5.0%. That said, all of our panelists expect the easing cycle to continue in the current quarter. By the end of the year, our Consensus expects 125 basis points of cuts, though the spread remains large at 25–225 basis points. The Bank will announce its next monetary policy decision on 29 August.

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