According to Timur Suleymenov, head of the National Bank, the government must prevent further lowering of the base rate in the near future.
As the official noted, the tough monetary policy of the National Bank over the past nine months was justified and helped to slow down inflation. This trend has been reported since March 2023. However, further lowering of the base rate isn’t a good idea, according to the chair of the regulator.
«Why do we believe that a 16% rate is absolutely necessary and that it wouldn’t be a good idea to cut it overnight? Inflation is not just about price increases related to some products. This is a situation when a price surge hits the entire economy and the money supply is bigger than commodity weight. When we have money but don’t have enough goods, this money would put pressure on prices starting from staples to real estate, cars, durable goods, etc. That is why the critical task of the National Bank is to prevent this money supply from entering the product markets. We need to keep the base rate and we are doing so,» Suleymenov said during a meeting with members of the parliament.
If the base rate is lowered, banks will be more interested in issuing loans to people and businesses rather than notes by the National Bank, the official underlined. Therefore, the regulator must be very careful when it comes to monetary policy to avoid such a scenario.
Last year, Kazakhstan reported a sharp increase in inflation after Western countries introduced sanctions against Russia that disrupted many logistical chains. In late 2022, the inflation rate reached 20.3% pushing the National Bank to raise the base rate to a historic high of 16.75%. The former head of the bank Galymzhan Pirmatov said that the regulator would ease its policy in the second half of the year. In late August, the National Bank reduced the base rate by 0.25 percentage points to 16%.
Suleymenov was appointed as the chair of the National Bank in early September. As of October, the inflation rate in Kazakhstan was 10.8% (11.8% in September) year-on-year and 0.7% (0.6%) month-on-month.
