Today, on October 26, the National Bank of Kazakhstan increased the base rate from 14.5% to 16% with a percentage corridor of +/- 1.0 p.p. The new standing lending facility rate is 17%, while the standing facility rate for liquidity withdrawal is 15%, according to the regulator’s press service.
According to the National Bank, the move is a result of growing inflationary pressure on Kazakhstan’s economy. The regulator also pointed out that even though it has corrected the rate’s trajectory, its overall direction and tempo remain the same.
In September, the inflation rate was higher than projectedThe National Bank of the Republic of Kazakhstan
Among other factors that affected the rate were: strong consumer demand, fiscal boost, cost-push due to the shift to more reliable supply chains, external inflation influence and the strong Russian ruble, the bank said.
The financial authorities expect that the effect of raising the base rate will appear in 1-2 years. The new rate can support the money-saving pattern and strengthen the balance in the domestic foreign currency market.
Kazakhstan’s base rate was increased four times this year. The last such increase was on July 25 when the national bank raised the base rate to 14.5% with a percentage corridor of +/- 1 p.p. and annual inflation of 15%. The explanation for that summer increase was similar to the current one: a gap between inflation and its projected trajectory grew too big.
On September 5, the regulator decided not to change the rate. In October the authorities reported 17.7% of annual inflation.
Some experts and officials believe that even with global uncertainty and growing inflation Kazakhstan can afford the lower base rate thanks to its economy and sustainable banking system. Moreover, the higher base rate can’t affect inflation in the long term, they say.
On September 22, Prime Minister Alikhan Smailov said that the cabinet and the National Bank are thinking about softening the monetary policy in the country. However, he admitted that the government has to stabilize inflation before going any further in this direction.