Kazakhstan's National Bank Maintains Base Interest Rate at 16.5 Percent

The National Bank of Kazakhstan has announced its forecast for inflation rates over the next few years, aiming to curb inflationary pressures and maintain financial stability. According to the bank's projections, inflation is expected to decrease gradually over the next few years.

For 2023, inflation is forecast at 11-12.5%, easing to 9.5-11.5% in 2026 and further decreasing to 5.5-7.5% in 2027. The bank has introduced new measures to strengthen monetary policy transmission, including the introduction of new minimum reserve requirements from September onwards.

Despite these efforts, inflationary pressures remain high. In July, monthly inflation eased slightly to 0.7%, but annual inflation stood at 11.8%. Food and non-food prices continued to rise during the month, reflecting global inflationary trends. Service prices growth also slowed for the first time in 2023, but remained elevated.

Inflation expectations have also increased, with the latest data showing an expectation of 14.2%. The bank has noted that if inflation does not slow significantly in the coming months, tightening of monetary conditions may be required.

External factors, such as rising global food prices, high inflation in Russia, and slower-than-expected monetary easing by the U.S. Federal Reserve and the European Central Bank, are putting pressure on inflation. The bank has also announced plans to slow credit growth and curb inflationary pressures through targeted monetary policy tools and regulatory measures aimed at balancing economic growth and price stability.

In a recent announcement, the National Bank of Kazakhstan kept the base interest rate unchanged at 16.5% per year. The bank stated that this move was aimed at continuing to combat inflationary pressures while maintaining financial stability. Further measures to cool retail lending and contain inflationary pressure are also planned.

GDP growth is forecast at 5.5-6.5% for 2023, supported by strong investment and consumer demand. For 2026, GDP growth is projected at 4-5%. The next decision on the base rate will be announced on Oct. 10. The bank has established a corridor of +/-1 percentage point around the base rate, providing some flexibility in its monetary policy decisions.

In conclusion, the National Bank of Kazakhstan is taking proactive steps to combat inflation and maintain financial stability. Despite the challenges posed by external factors, the bank is committed to achieving its inflation targets and supporting economic growth. The next decision on the base rate will be closely watched by investors and economists alike.