National Bank of Kazakhstan leaves rates unchanged in July

Bank stands pat as expected: At its meeting on 11 July, the National Bank of Kazakhstan (NBK) decided to maintain the base rate at 16.50% and kept the interest rate corridor at plus or minus one percentage point. The hold matched June’s decision and came on the heels of a cumulative 225 basis points of hikes since late 2024. As a result, rates remain at some of their highest levels in recent decades. The decision had been priced in by the markets.

Stubbornly high inflation drives the decision: The NBK opted to maintain a restrictive monetary policy stance due to sticky price pressures. In June, inflation remained elevated, notably for services and food, driven by fiscal stimulus and robust consumer demand. Moreover, strong growth in retail lending and high, albeit declining, inflation expectations among the population further contributed to these pressures.

NBK should hold fire ahead: The Central Bank indicated a “high likelihood” that it would maintain the base rate at its current level through the end of 2025. However, it did not rule out the possibility of increasing the base rate if necessary, with future decisions to be based on its updated macroeconomic projections. The majority of our panelists expect interest rates to remain at current levels or rise further by the end of 2025. Upside risks to rates include heightened uncertainty in global trade and persistent geopolitical tensions, both of which are contributing to increased volatility across financial and commodity markets. The NBK will reconvene on 29 August.

Panelist insight: Commenting on the outlook, Basak Edizgil and Clemens Grafe, analysts at Goldman Sachs, stated: “Further Tenge depreciation through July and continued fuel price hikes imply that domestic pressures will remain elevated in the coming months, [which is] likely to keep the Bank cautious in the near term. We continue to expect the NBK to remain on hold until year-end given its focus on disinflation, but think that the risks to our forecast [for rates] are to the downside from a more dovish external rate environment.”

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