Kazakhstan: Central Bank tightens its stance in March
Central Bank delivers surprise 125 basis point hike: At its meeting on 7 March, the National Bank of Kazakhstan (NBK) decided to raise the base rate by 125 basis points to 16.50% and keep the interest rate corridor at plus or minus 1.0 percentage point. The hike, which came on the heels of January’s hold, brought rates to some of their highest levels in recent decades and only slightly lower than 2022–2023’s peak levels. The decision surprised markets, which had anticipated the NBK standing pat.
Accelerating price pressures and rising inflationary risks motivate decision: The Bank determined that a tighter monetary policy stance was required to drive inflation toward its 5.0% medium-term target. Inflation rose to a 13-month high of 9.4% in February, remaining entrenched above the target—where the Bank expects it to stay until at least 2027. Moreover, the Bank hiked its 2025 inflation forecast by 3.5 percentage points to 10.0–12.0% as a result of excessive credit growth, rising price pressures in Russia, energy tariff hikes, fiscal stimulus and a planned VAT hike this year. Moreover, the NBK assessed that core inflation and inflation expectations continued to climb through February, and likely also aimed to continue to support the tenge, which fell to a record low in January. Meanwhile, regarding economic activity, the Bank lowered its 2025 and 2026 GDP growth projections by 0.3 percentage points to 4.2–5.2%.
Bank to embark on an easing cycle ahead: In its communiqué, the NBK was more dovish than in past meetings, indicating that March’s decision aimed to “avoid the need for a more significant rate hike in the future”. Still, the Bank pointed to rising inflationary risks associated with unanchored inflation expectations, fiscal stimulus plus a proposed VAT hike.
Our panel anticipates inflation to slow in 2025 as a whole but to exceed the NBK’s inflation target; as such, risks to the policy rate are skewed to the upside. Our Consensus is for renewed monetary policy easing ahead, with our panelists penciling in 25–300 basis points of cuts for this year.
The Bank will announce its next monetary policy decision on 11 April.
Panelist insight: EIU analysts said:
“We expect a period on hold, with the NBK returning to a gradual easing stance during the second half of the year, although there is a clear risk that resilient price pressures delay this process. We forecast a benchmark rate of 14% at end-2025.”
Goldman Sachs’ Basak Edizgil and Clemens Grafe commented:
“We think that the NBK’s guidance and the size of its rate hike (sufficient to offset the recent easing in monetary conditions) imply that the decision was a one-off response to the rise in inflation in February (from 8.9%yoy to 9.4%yoy). Moreover, we expect the Tenge’s recent appreciation trend to continue and therefore see the Bank remaining on hold for now.”