NUR-SULTAN

Kazakhstan’s National Bank raised its key policy rate to 9.50 percent from 9.25 percent to curb rising inflation.

The bank had been holding the rate for six months since cutting it by 50 basis points in July 2020, as it monitored inflationary pressures. In July 2021, the bank raised the rate to 9.25 percent.

The rate corridor was kept at plus or minus 1.0 percentage points, the central bank said. The rate on access operations to provide liquidity was set raised to 10.50 percent, and the rate on access operations to withdraw liquidity – to 8.50 percent.

The central bank said that the decision was prompted by the prevailing pro-inflationary pressure in the economy caused by the global inflationary tendencies of rising prices for food and raw materials, with the outstripping recovery of global demand over output possibilities.

“This pressure is amplified by internal off-season shocks, actively recovering consumer demand, as well as rising prices for electricity, gas, fuels and lubricants,” the bank said in a statement.

The central bank said that the effect on the recovery of business activity of the instability caused by the COVID-19 pandemic globally and, in particular, in Kazakhstan, was taken into account.

“The rise in the rate will maintain the attractiveness of tenge assets, which will increase the efficiency of pricing in the foreign exchange and money markets, in order to form expectations that exclude unwanted balances,” it said.

The bank added that the inflationary background was aggravated by the increased inflationary expectations of the population, which amounted to 8.8 percent in August.

Consumer prices in Kazakhstan rose by 8.4 percent year-on-year in July after rising 7.9 percent in June. Monthly inflation in July was 0.7 percent, down from 1.1 percent in June.

Kazakhstan’s National Bank forecasts annual inflation in a range of 7.5-8.5 percent in 2021. It expects annual inflation to return to the target band of 4-6 percent in 2022.

The economy is showing tentative signs of recovery. In January-July, real Gross Domestic Product (GDP) growth amounted to 2.7 percent in annual terms. The economy is recovering owing to the rising global commodity prices and easing quarantine restrictions. The manufacturing industry, trade, construction, information and communications, and agriculture showed stable growth in the first seven months of 2021.

Kazakhstan projects its economic growth to reach 3.5-3.8 percent this year.

The Asian Development Bank (ADB) increased its economic growth forecast for Kazakhstan to 3.4 percent from 3.2 percent in 2021.

By comparison, the International Monetary Fund said in April that Kazakhstan’s GDP was forecast to grow 3.2 percent in 2021 and 4.0 percent in 2022. Annual inflation is projected at 6.4 percent this year and 5 percent in 2022.

The World Bank’s latest projections were also optimistic. It forecast that growth will rebound to within 3 to 4 percent growth in 2021 and 3.5 percent expansion in 2022, driven by the resumption of domestic activity, recovery in global demand for oil, continued fiscal support measures, and a successful national inoculation against the COVID-19 virus.