National Bank of Kazakhstan Raises Base Rate Amid Inflation Risks

Photo: Kazakhstan Today

The Monetary Policy Committee of the National Bank of Kazakhstan has decided to set the base rate at 15.25% per annum with a corridor of +/- 1 percentage point. This decision is based on updated forecasts and an assessment of inflation risk balance, Kazinform News Agency correspondent reports.

"Overall monetary conditions have eased due to a weakening exchange rate, a decline in real interest rates driven by rising inflation, and higher inflation forecasts for the coming years. Combined with increased volatility in financial markets, these factors necessitated an increase in the base rate," states the National Bank, The Caspian Post reports, citing Kazakh media.

Amid ongoing volatility in financial and energy markets, the Committee will closely monitor the need for additional monetary tightening in its upcoming decisions. This is aimed at ensuring a swift return of inflation to a sustainable downward trajectory and achieving the target rate of 5%.

The next scheduled decision of the Monetary Policy Committee of the National Bank of the Republic of Kazakhstan on the base rate will be announced on January 17, 2025, at 12:00 Astana time.

Amid fluctuations in the exchange rate of the tenge, the Governor of the National Bank, Timur Suleimenov, noted that changes in the US dollar exchange rate could impact the cost of imported goods.

However, he emphasized that food prices are unlikely to see significant changes, as Kazakhstan is largely self-sufficient in agricultural production.

“We are realists - we understand that changes in the US dollar exchange rate can impact goods imported from other countries. However, when it comes to food products, I would classify them as items where we have a high level of self-sufficiency. Over the years, the Ministry of Agriculture, together with the market and farmers, has ensured a significant supply of domestic products. Therefore, in this area, I wouldn’t expect any noticeable changes in prices,” notes the Governor of the National Bank.

Timur Suleimenov also noted that a dollar exchange rate of 500 tenge is, of course, a "psychological number," but from a mathematical perspective, it represents only a 2% increase in the value of the US dollar.

"This 2-3% weakening of the tenge over the past couple of weeks may have some impact on prices, but certainly not in such a panic-inducing way. I wouldn’t worry too much about prices changing instantly, especially for food products. We are almost entirely self-sufficient in that regard," says Suleimenov.

To support the national currency, the National Bank has already initiated foreign exchange interventions. The National Bank plans to continue taking measures to stabilize the currency market and minimize the impact on consumer prices.