National Bank of Kazakhstan maintains base rate at 14.75% pa
ASTANA. April 12 (Interfax) - The monetary policy committee of the National Bank of Kazakhstan has decided to maintain the base rate at 14.75% per annum with a corridor of +/- 1 percentage point, the regulator's press service said.
"Annual inflation continued decelerating in February and March, though at a slower pace. Inflation expectations have decreased slightly, though remain at a rather high level. Achieving the 5% inflation target requires maintaining moderately tight monetary conditions. Room for monetary easing remains limited in the current conditions. It [room] should begin to form amid a stable decline in the sustainable part of inflation," the press service said.
The majority of analysts surveyed by Interfax had forecast a rate cut from 25 basis points to 50 bps.
The National Bank said external inflationary pressures remain neutral, despite the ongoing downward trend in grain prices globally. However, inflationary pressures persist in the domestic economy due to stable domestic demand and lingering inflation expectations.
"Inflation expectations among the population have slightly decreased, yet they remain at a high level. This is primarily due to rising prices for food, housing and utilities, and fuel," the regulator said.
Additionally, a neutral external inflationary backdrop is observed: food prices on global markets in March showed a slight increase, mainly driven by higher prices for vegetable oils, while grain prices continue to decline due to the sale of harvested crops in exporting countries and the smooth functioning of maritime trade routes.
"Oil prices are slightly above the baseline scenario, which will benefit Kazakhstan's trade balance. However, high oil prices may contribute to an increase in external inflationary pressures," the press release said.
The National Bank identifies pro-inflationary risks associated with ongoing reforms in regulated prices, the aftermath of massive floods in Kazakhstan, and uncertainties regarding the necessary budget expenditures to address these issues.
"The National Bank remains committed to achieving the 5% inflation target in the medium term. This requires a consistently tight monetary policy. Given the current circumstances, there's limited room for easing monetary policy," it said.
The regulator will continue to monitor the sustainable part of inflation, unaffected by one-time factors such as price cap reforms.
"The opportunity to lower the base rate will arise with a persistent decline in the sustainable part of inflation," the National Bank said.
Previously, the regulator cut the rate five times, from 16.75% in July 2023 to 14.75% in February 2024. Prior to this, the rate remained at 16.75% since December 2022.
The next decision on the base rate will be announced by the National Bank on May 31, 2024.