Kazakhstan cuts base rate by 100bp to 17 percent
The National Bank of Kazakhstan has reduced its base rate by 100 basis points to 17 percent. Governor Timur M Suleimenov cited slowing annual inflation and a comprehensive assessment of macroeconomic trends.
Inflation's slowing grip
The Monetary Policy Committee's decision follows a comprehensive forecast round and assessment of macroeconomic trends.
Annual inflation continues to slow, reaching 10.4 percent in May, down from a peak of 12.9 percent in September last year.
This slowdown is evident across services (8.7 percent) and food (10.7 percent).
Monthly headline inflation eased to 0.7 percent in May.
The National Bank attributes this to its monetary policy stance, tenge appreciation, stabilized consumer demand, and government anti-inflationary measures.
While the balance of risks remains pro-inflationary, it is less pronounced, allowing for the rate cut.
The primary objective is to ensure a sustained decline in inflation, stabilizing it near 5 percent over the medium term.
Domestic recovery, external headwinds
Kazakhstan's domestic economy shows recovery, with GDP growing 3.6 percent year-on-year in January–April, driven by non-oil sectors.
Domestic demand is normalizing, with retail trade up 3.4 percent and household lending growth slowing to 10.7 percent in April.
Investment activity expanded, with fixed capital investment rising 6.7 percent.
Externally, global energy and food prices remain elevated due to the Middle East conflict, influencing inflation in advanced economies.
The Bank of Russia eased rates, while the ECB held steady, and the Fed maintained a hawkish stance, with markets pricing in further hikes.
Cautious easing, complex path
The rate cut reflects cautious optimism regarding disinflation, yet the Bank acknowledges persistent pro-inflationary risks.
Effective coordination with government on fiscal consolidation and quasi-fiscal stimulus is crucial for non-inflationary growth.
Achieving the 5 percent inflation target by 2028 hinges on consistent implementation of these broader policy measures.