NUR-SULTAN

Kazakhstan’s National Bank raised its key policy rate to 9.75 percent from 9.50 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 and to 9.50 percent in September.

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 raised to 10.75 percent from 10.50 percent, and the rate on access operations to withdraw liquidity – to 8.75 percent from 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 decision was taken against the background of continuing pro-inflationary pressure in the economy, as a result of which inflation is formed above the forecast range of 7.5-8.5 percent in 2021, rising prices in world markets, accelerating inflation in trading partner countries and high inflationary expectations within the country,” the bank said in a statement.

The central bank said that acceleration in inflation was observed across all components. The main contribution to the acceleration of annual inflation continued to be made by the growth in food prices.

Consumer prices in Kazakhstan rose by 8.9 percent year-on-year in September after rising 8.7 percent in August. Monthly inflation in September was 0.4 percent, down from 0.5 percent in August. In January-September annual inflation was 6.2 percent.

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 central bank said that the dynamics of development of the real sector coincides with the bank’s expectations. Economic growth amounted to 3.4 percent in the first nine months of this year, “following the optimistic scenario” of the regulator.

Kazakhstan’s economy continued to grow and get closer to pre-pandemic levels in the first nine months of this year, supported by a strong performance in services, communications, construction and trade.

Gross domestic product (GDP) grew by 3.4 percent year-on-year in January-September backed by a 3.5 percent growth in the real sector, 2.9 percent growth in services.

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

According to the World Bank’s latest projections, the economy is expected to grow 3.5 percent in 2021 followed by 3.7 percent growth 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.

In July, the Asian Development Bank revised Kazakhstan’s economic outlook forecast upwards to 3.4 percent from 3.2 percent in 2021. The ADB said Kazakhstan’s 2022 growth forecast would stay at 3.5 percent.

By comparison, the International Monetary Fund said earlier this month that Kazakhstan’s GDP was forecast to grow 3.3 percent in 2021 and  3.9 percent in 2022. Annual inflation is projected at 7.5 percent this year and 5.8 percent in 2022.