Regulator in Kazakhstan keeps base rate at the same level of 13.5%

This level reflects the current reaction of the bank to increasing geopolitical risks

On March 9, 2022, the National Bank of Kazakhstan decided to keep the base rate at the level of 13.5% with a percentage corridor of +/-1 p.p. The rate of standing facilities is 14.5% for liquidity provision and 12.5% for liquidity withdrawal.

The National Bank noted that the decision to keep the base rate at the same level reflects the current reaction of the regulator on increasing geopolitical risks and the risk of accelerating the inflation rate. However, the National Bank has some room for tightening monetary policy further if the external or internal macroeconomic situation worsens. 

In February 2022, the yearly rate of inflation in Kazakhstan rose to 8.7% (in January 2022 it was 8.5%) amid a price surge in the country.

The central bank believes that the inflation rate is going to hit prior forecasts as the county hugely relies on imported goods. This factor impacts the exchange rate of the tenge and drives internal prices to their highs.

Geopolitical balance and the situation in those countries that are the key trade partners of Kazakhstan have been changing so fast that the level of uncertainty is incredibly high now. And of course, it is almost impossible to make any forecasts amid all of this.

The central bank is ready to change the base rate if the inflation rate changes or the geopolitical situation around the country worsens.

The next decision on the base rate of the National Bank is going to be announced on April 25, 2022.

The last decision on the rate was taken on February 24, 2022, when the base rate was increased from 10.25% to 13.5% with a percentage corridor of +/– 1 p.p. This decision was based on a worst-case scenario developed by the National Bank as it has aimed at keeping prices stable even if the geopolitical tensions worsen.

The regulator has been gradually decreasing the base rate since July 2016 (15%). In February 2020, the base rate was decreased to 9.25%. In March 12% it was increased to 12% and plummeted to 9.5% in April that year. In July 2021, the rate was increased to 9.25%; in September to 9.5% and 9.75% in October. In January 2022, the base rate in Kazakhstan was increased to 10.25%.

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