National Bank of Kazakhstan Keeps Base Rate at 15.25% Amid Rising Inflation
The National Bank of Kazakhstan (NBK) has decided to maintain its base rate at 15.25%, as announced by Governor Timur Suleimenov on January 17. Inflation in Kazakhstan reached 8.6% in December, in line with the forecasted 8-9% range for 2024, driven by rising service costs and non-food product inflation since August.
Inflationary pressures are linked to strong consumer demand, fiscal stimulus, increasing utility prices, and the weakening of the tenge, which has heightened inflation expectations to 14.6%.
Kazakhstan’s economy saw a 6.2% growth rate by the end of 2024, driven by increases in agriculture, construction, trade, and transport.
Additionally, global oil prices surpassed $80 per barrel in January due to factors like new U.S. sanctions on Russia and geopolitical tensions, which are expected to sustain high oil prices in the near future.
“External price pressures stem from rising inflation in Russia, Kazakhstan’s key trading partner. Additionally, inflation in leading global economies has been gaining momentum in recent months, laying the groundwork for a prolonged period of elevated global interest rates. These expectations are already reflected in the strengthening of the U.S. dollar, which exerts pressure on the currencies of emerging markets, including the tenge,” said Suleimenov.
The National Bank has also focused on increasing international reserves through gold purchases, raising reserves to $45.8 billion, including $23.8 billion in gold. However, these gold purchases contribute to inflation due to the issuance of tenge.
“We are starting dollar sales as part of mirroring operations related to gold purchases,” Suleimenov said. “I would like to emphasize that these operations are not currency interventions. Their main objective is to reduce the excess amount of money in the economy and achieve the 5% inflation target. At the same time, these measures will create an additional currency supply in the domestic market, contributing to balancing the domestic currency market.”
With these factors in mind, Suleimenov stressed that the National Bank would “thoroughly assess” the need for additional monetary tightening measures.
“We want to emphasize that, if necessary, we are prepared to promptly adopt stricter decisions to stabilize inflation expectations and guide inflation back onto a sustainable downward path, aiming for the target rate of 5%,” he said.
Photo credit: National Bank of Kazakhstan
