17 Jan 2025 10:32

National Bank of Kazakhstan keeps base rate at 15.25% per annum

ASTANA. Jan 17 (Interfax) - The National Bank of Kazakhstan's Monetary Policy Committee has decided to maintain the base rate at 15.25% per annum, with a corridor of plus-minus 1 percentage point, the bank's press service said.

"In December, [annual] inflation in Kazakhstan reached 8.6%, aligning with the 2024 forecast range of 8%-9%. Key contributors include a sharp rise in service prices and accelerating non-food inflation since August. This upward trend is linked to the implementation of the Tariff in Exchange for Investments program and the depreciation of the tenge. Core inflation also remains elevated, reflecting demand-side pressures driven by continued fiscal stimulus," the National Bank said.

External inflationary pressure remains elevated amid high global food prices and accelerating inflation in Russia. "In developed economies, inflation has picked up slightly in recent months after a period of decline. Strong labor markets and persistent inflation suggest that tight monetary conditions may last for longer. For example, the U.S. Federal Reserve now anticipates a slower pace of rate cuts compared to its September forecast," the bank said.

Demand continues to outpace supply and remains persistently high amid a fiscal stimulus, rising household incomes and increased investment in non-resource sectors.

Pro-inflationary risks remain, the bank said. Externally, they come from higher inflation in Russia, while domestically they are determined by the ongoing reforms in regulated pricing, the effect of the tenge's weakening on prices, strong domestic demand amid fiscal stimulus, unanchored inflation expectations and growth in consumer lending.

The National Bank will assess the need for additional tightening of monetary policy when making its next decision, it said.

"Monetary conditions have slightly eased recently due to the tenge's depreciation, higher inflation expectations, and an uptick in actual inflation. In this regard, at the next decision, during which the forecasts for key macroeconomic indicators will be updated, the committee will evaluate the need for further tightening of monetary policy to bring inflation back to a sustainable downward trajectory towards the target of 5%," the bank said.

The decision aligns with the forecast of most analysts surveyed by Interfax.

Unexpectedly for the market, the National Bank decided to raise the base rate to 15.25% per annum at the end of November 2024, from the level of 14.25% which it had been at since July. Prior to this, the bank lowered the rate four times in 2024 - by 50 basis points in January to 15.25%, by 50 bps in February to 14.75%, by 25 bps in May to 14.5%, and by 25 bps in July to 14.25%.

The median value of the base rate in 2025 will be 13.75%, the bank said.

The National Bank's next decision on monetary policy is scheduled for March 7.