National Bank raises base rate to 14% in Kazakhstan

On April 25, 2022, the National Bank of Kazakhstan decided to raise the base rate from 13.5% to 14% with a percentage corridor of +/-1 p.p. The standing lending facility rate is now 15% while the standing facility rate for liquidity withdrawal is 13%.

The regulator said that this decision is based on the strong intention to prevent inflation amid rising geopolitical risks and a global price surge that affects Kazakhstan as much as many other countries in the world. On the other hand, for three years in a row fiscal boost has been one of the main drivers of inflation in Kazakhstan.

In March 2022, the yearly rate of inflation reached 12% (In February it was at 8.7%). The annual rates of food and non-food price growth are 15.4% (10%) and 10.9% (8.6%) respectively. The cost of services has risen by 8.3% (7.1%).

According to the International Monetary Fund forecast, global inflation is going to be quite high in 2022. However, this rate will not be the same for different nations. For instance, in developed countries, this rate is going to be about 5.7% (the previous forecast was 3.9%) while in developing countries the rate may reach 8.7% (5.9%). In 2023 inflation may plunge to 2.5% in rich countries and 6.5% in developing nations due to global economic decline.

Concerning Kazakhstan, in the first quarter of the current year, the inflation rate was 4.4% on a year-on-year basis.

Future decisions of the National Bank will be dependent on new statistical data and results of the period from May to June. The bank keeps some room for further tightening of the monetary policy. Of course, how far it is going to go will be dependent on inflation expectations, composite demand and import and risks of potential inflationary shock.

Another scheduled decision of the committee on monetary policy of the National Bank concerning the base rate is going to be announced on June 6, at 3:00 p.m. Nur-Sultan time.

On March 9, the National Bank decided not to change the base rate and kept it at 13.5%. On February 24, the rate was increased from 10.25% to 13.5% with a percentage corridor of +/– 1 p.p. At that time, this decision was driven by the idea to stabilize prices amid rising geopolitical tensions as the regulator had prepared itself for this worst-case scenario.

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%.