Kazakhstan's National Bank has raised its base rate.

Astana. November 29. KAZAKHSTAN TODAY - The Committee on Monetary Policy of the National Bank of the Republic of Kazakhstan has decided to set the base rate at 15.25% per annum with a corridor of +/- 1 percentage point.

The National Bank noted that this decision was made considering updated forecasts and an assessment of the inflation risk balance.

Annual inflation in Kazakhstan rose to 8.5% in October, driven by significant increases in regulated services amid the implementation of the "Tariff for Investment" program and the weakening of the tenge. The stable component of inflation is also on the rise. The acceleration of inflation was influenced by the increase in prices for non-food goods and market services in the context of high domestic demand. Pro-inflationary pressure within the economy persists due to ongoing fiscal stimulation resulting from unfulfilled budget revenue. Public inflation expectations decreased in October but remain volatile," the financial regulator reported.

It is noted that the overall slowdown in global inflation, the easing of labor market tensions, and slower business activity are leading to a gradual easing of external monetary conditions in developed economies. At the same time, external inflationary pressure is intensifying due to rising global food prices observed in recent months and higher inflation along with significant exchange rate fluctuations in Russia. There has been a marked increase in volatility in financial markets, which may contribute to rising uncertainty and inflation expectations.

According to the National Bank, in the baseline scenario, the price of Brent crude oil has been revised downward to $70 per barrel on average until the end of the forecast period. The scenario conditions have been formed considering the actual price dynamics, decreased demand from China, a slowdown in the global economy, and increased production in North and South America.

The inflation forecast for 2024 has been adjusted to 8-9%. The forecast for 2025 has been revised upward to 6.5-8.5%, and for 2026 to 5.5-7.5%. The stable component of inflation is expected to be around 5% by 2026. Overall inflation is anticipated to align with the target by 2027. The higher inflation estimates for the upcoming years are linked to the expansion of fiscal stimulation, the continuation of housing and communal services reforms, the weakening of the exchange rate, and increasing external inflationary pressure. Risks to the inflation forecast are associated with rising pressures from domestic demand, accelerating external inflation, and heightened inflation expectations. Furthermore, there remains uncertainty regarding the tools for stabilizing public finances. Further liberalization of regulated prices and tariffs, as well as the pace and timing of this process, also pose significant risks to the forecast.

The economic growth forecast for Kazakhstan in 2024 has been refined to 4-4.5%. The forecasts for 2025 and 2026 have been adjusted to 4.5-5.5% and 4.6-5.6%, respectively.

Lower forecasts are linked to the decline in scenario oil prices and moderate external demand. According to the National Bank's estimates, during the forecast period, the economy will grow under conditions of demand expansion that outpaces internal supply capabilities. This will exert persistent pro-inflationary pressure," clarified the National Bank.

It is reported that the overall monetary conditions have eased amid a weaker exchange rate, lower real interest rates due to rising inflation, and elevated inflation forecasts for the upcoming years.

In conjunction with increased volatility in financial markets, this necessitated a rise in the base rate. Against the backdrop of volatility in financial and energy markets, the Committee will closely monitor the need for additional tightening of monetary policy to expedite the return of inflation to a trajectory of sustainable slowdown and achieve the target of 5%," the National Bank added.

The next scheduled decision by the Monetary Policy Committee regarding the base rate will be announced on January 17, 2025, at 12:00 PM.

Recall that yesterday, the dollar was sold in Kazakhstan's exchange offices for over 520 tenge per dollar. The National Bank commented on the sharp rise in the dollar's exchange rate.