Kazakhstan’s central bank lowered its base rate by 25 basis points to 9.0 percent, the first change in since a rate hike in October 2018, saying this cut should help keep inflation within the target corridor in 2019 and 2010 while maintaining economic growth.
The National Bank of Kazakhstan (NBK) said future decisions about the base rate will depend on how inflation evolves as compared with its forecast and expectations for 2020.
Today’s policy easing comes after Kazakhstan’s new president, Kassym-Jomart Tokayev, on April 12 ordered the central bank to find ways to lower banks’ lending rates, according to Reuters.
Tokayev, former speaker of the country’s upper house, was named interim head of state until an election on June 9 following President Nursultan Nazarbayev’s surprise resignation in March after almost 30 years in office.
Nazarbayev, 78, led oil-rich Kazakhstan since 1989 when it was still part of the Soviet Union and was then elected president in 1991 and re-elected in successive elections, most recently in 2015.
In February Nazarbayev accepted the resignation of NBK’s chairman, Daniyar Akishev, and nominated cabinet minister Erbolat Dossaev, 48, as his replacement as part of a broader reshuffling of the cabinet.
The change in NBK leadership followed Nazarbayev’s call on the central bank and the government cabinet to boost economic growth to 5 percent this year from an estimated 4.1 percent in 2018.
Inflation in Kazakhstan was steady at 4.8 percent in March and February, within NBK’s target corridor of 4.0-6.0 percent, and the central bank noted a slowdown in inflation in its major trading partners as well as higher commodity prices, including oil prices.
However, NBK said inflation expectations had continued to decline and this should have a beneficial effect on stabilizing inflation in the future.
In NBK’s quarterly forecast from March, inflation expectations 12 months ahead were 4.5 percent, with the inflation trajectory revised downwards from the November-December forecast.
By 2020 some inflationary risks were possible from the waning impact of lower tariffs on regulated services, continued growth in consumer demand from fiscal stimulus and the gradual elimination of the output gap by the end of third quarter of 2020, the inflation report said.
Domestic demand in Kazakhstan expanded 9.4 percent in the first two months of this year on an annual basis, helped by higher income and a 13.5 percent rise in consumer loans.
In its inflation report NBK forecast that economic growth in 2019-2020 would slow to below 4.0 percent, around its potential, with domestic demand the key driver.
In the fourth quarter of last year, Kazakhstan’s gross domestic product grew an unchanged 4.1 percent year-on-year from the third quarter.
Kazakhstan cuts rate 25 bps, inflation expectations ease