National Bank maintains 10.5-percent base rate

ASTANA – The National Bank of Kazakhstan will maintain a 10.5-percent base rate with a corridor of +/- 1 percent, the Bank announced recently.

natsbank

The annual inflation rate matches the bank’s forecast and remains within the target range. Citizens are expected to increasingly take to saving their money in tenge, as the nation’s economy continues to demonstrate recovery.

The inflationary risks are possible because of specific goods, markets and external parameter deviations from the base scenario of economic development. The deceleration trajectory of forecasted inflation in the medium term, however, increases the possibility of lowering the base rate both in the short run and in the upcoming 12-18 months to provide the corresponding real interest base rate with the long-run potential economic growth rate.

The annual inflation in June was 7.5 percent, which continues to remain within the National Bank’s target range of 6-8 percent. The important signs of the descending inflation trend are the lower rate of inflation in the first half of the year (3.7 percent) in comparison to that of the first half of 2016 (4.6 percent). The base inflation indicators have been significantly decelerating since the beginning of the year.

The base inflation rate in June was 6.8 percent compared to 8.9 percent in December. The short-term inflationary risk of the past months has resulted from the situation in specific segments of the food market, but the beginning of the new harvest period has smoothed the negative tendencies of general food price dynamics. The inflationary expectation of the population has remained stable since the beginning of 2017.

The situation with the external commodity market can be characterised as volatile. Oil prices below $50 per barrel and price increases in world food markets in May-June, mostly as a result of the price rise of diary and crop products, might lead to increased inflationary pressure.

Depositors’ currency preferences remain stable, as citizens prefer to save their money in national currency. The share of loans in tenge is also on the rise. In addition, the demand for crediting recourses remains stable and is accompanied by the gradual rate decrease.

The Kazakh economy continues to demonstrate recovery and monetary conditions remain neutral. In conditions of excess liquidity, local money market rates remain next to the lowest limit of the interest rate corridor. Due to implementing state programmes aimed at increasing the financial sustainability of the nation’s banking sector, further recovery of its crediting activity is expected in the third quarter of the year.

The next decision on the base rate will be announced Aug. 21.

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