NBRK raised base rate

Collage © Adilbek Tauekelov /
The Monetary Policy Committee of the National Bank of the Republic of Kazakhstan resolved to set the base rate at 9.25% per annum with an interest rate corridor of +/– 1.00 pp. Accordingly, the rate on continuous access operations to provide liquidity will be 10.25%, and on continuous access operations to withdraw liquidity - 8.25%, reports with reference to the press service of the National Bank of Kazakhstan.

Weighted tightening of monetary policy is prompted by the need to anticipate the risks of unwinding an inflationary spiral and to return inflation to the target corridor of 4-6% in 2022. At the same time, the influence of the unstable epidemiological situation in the world and, in particular, in Kazakhstan, on the restoration of business activity was taken into account. The rate increase will support attractiveness of tenge assets, which will increase the efficacy of pricing in the foreign exchange and money markets in order to form expectations that exclude unwanted equilibria.

The decision is driven by realized inflation risks on the supply side and sustained pro-inflationary demand-side pressure in the economy. Inflation is being formed above forecasts, while expectations for further price growth remain high and unsecured. The rapid recovery of economic growth and dynamics of consumer activity with a significant fiscal impulse forms a pro-inflationary trend.

At the same time, such significant factors as the rise in prices for certain groups of food staples against the background of the general global trend of rising food prices, disruptions in supply chains, rising producer prices with growing prices for raw materials and supplies, as well as the continuing potential for growth in regulated prices are concentrated on the supply side. International experience shows that the impact of the transmission mechanism of monetary policy on supply shocks is limited, and inflation adjustment to these changes is inevitable. Based on this practice, the National Bank, by its decision, is more responsive to risks from the demand side associated with the grown inflationary expectations.

Given the lags in the impact of changes in the base rate on the economy and the expected finding of inflation outside the target band of 4-6% by the end of 2021, subsequent decisions of the National Bank on the base rate will be made taking into account inflation entering the target band in 2022. Upon the forecast round in September 2021, the National Bank is ready to take measures to further tighten monetary conditions in the event of an increase in pro-inflationary factors. In the second half of 2021, further acceleration of inflation is possible against the backdrop of a seasonally low base of food inflation in July and August last year, as well as the effect of deferred demand.

The next planned decision of the Monetary Policy Committee of the National Bank of the Republic of Kazakhstan on the base rate will be announced on September 13, 2021 at 15:00 Nur-Sultan time.

15:50, 26 July 2021

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