Central Bank holds rates in April

NBK stands pat as expected: At its meeting on 11 April, the National Bank of Kazakhstan (NBK) decided to maintain the base rate at 16.50% and keep the interest rate corridor at plus or minus 1.0 percentage point. The hold, which came on the heels of February’s surprise 125 basis point hike, kept rates at some of their highest levels in recent decades and only slightly lower than 2022–2023’s peak levels. The decision was broadly in line with market expectations, which were split between a hold and a 50 basis point hike.

First signs of stabilizing inflation and softer domestic demand dissuade a hike: The NBK determined that a tight monetary policy stance was required to consolidate a downward trend in inflation: Price pressures continue to be fanned by rising inflation in Russia, energy tariff hikes, fiscal stimulus and robust consumer demand. In addition, policymakers noted that inflation expectations remain elevated and pointed to significant uncertainty regarding the economic outlook, particularly concerning U.S. tariff policy. Still, the Bank opted against hiking rates, highlighting that cost pressures have continued to evolve in line with its latest forecasts and that monthly inflation has started to show signs of stabilizing. Moreover, the NBK assessed that domestic demand began to cool in Q1 despite tailwinds from infrastructure projects, consumer lending and growth in household incomes.

Policy shift to take hold later this year: In its communiqué, the NBK struck a more dovish tone than in past meetings, omitting a reference to further policy tightening and indicating, rather, that the scope for rate cuts in future meetings had not “yet” been established. In a subsequent statement, Governor Timur Suleimenov pointed to the high probability that the BNK would hold fire in coming meetings, while leaving the door open for unscheduled meetings in case of a “sharp change in the global economy” and the materialization of external and domestic economic risks, the latter associated with unanchored inflation expectations, fiscal stimulus plus a proposed VAT hike. Our Consensus is for inflation to slow in 2025 as a whole, and average below the NBK’s forecast range of 10.0–12.0%; as such, our panel expects the Bank to kick off a monetary policy loosening cycle later this year—most likely in H2—and deliver 25–300 basis points of cuts by December. The Bank will announce its next monetary policy decision on 5 June.

Panelist insight: ING’s Dmitry Dolgin commented on near-term decisions: “Going forward, we see the key rate remaining unchanged for at least the next couple of meetings. However, several risk factors could push inflation and the key rate towards the upper border of the official forecast range of 12.0% for CPI and 18.00% for the key rate. […] Domestic risks include a stronger pro-inflationary reaction to increased domestic utility tariffs and a pre-emptive spike in consumption ahead of the 2026 VAT rate hike.” Goldman Sachs’ Basak Edizgil and Clemens Grafe were slightly more hawkish: “FX weakness in March-April suggests that core momentum is likely to pick up in Q2. While the Bank's guidance suggests that it will prefer to use non-rate measures to curb inflation, we think that higher inflation will ultimately force a policy rate hike in Q2. The risks are skewed towards stable rates given the downside risks to growth from lower oil prices, assuming that the NBK intends to offset the likely pressure on the FX rate through interventions.”

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