Kazakhstan Stock Market (ann. var. of BET %)

Central Bank stays put at 16.75% in January

At its latest meeting on 13 January, the National Bank of Kazakhstan (NBK) kept its base rate unchanged at 16.75%, following its decision to increase it by 75 basis points at the beginning of December. Meanwhile, the interest rate corridor was kept at plus or minus 1.0 percentage points.

The NBK said that its decision was driven by inflation dynamics meeting its forecasts, including a gradual slowdown in monthly inflation; Inflation rose to 20.3% in December from 17.7% in November, but month-on-month inflation eased to 1.2% in December (November: 1.4%)—the lowest rate in six months. Moreover, the bank noted that external inflationary pressures were weakening.

That said, inflation expectations rose to an historic high in December, underpinning the NBK’s decision to maintain the policy rate at its current level.

The NBK struck a dovish tone in its communiqué; It underlined that taking into account the current balance of risks, the “potential for further increases in the base rate [was] limited”. As such, the NBK will likely maintain the base rate at current levels for an extended period of time “to avoid the anchoring of inflation expectations at high levels”.

Looking ahead, our panel forecasts the NBK to reduce the base rate by the end of 2023 as inflationary pressures lessen.

The next monetary policy meeting is scheduled to take place on 24 February.