The National Bank of Kazakhstan (NBK) has announced its first decision regarding the base rate for 2025: the rate remains unchanged at 15.25% per annum. The interest rate corridor is set at +/- 1.0 percentage points.
The previous decision was made on November 29, 2024, when the rate was increased by 1 percentage point from 14.25% to 15.25%, with the interest corridor of +/- 1 percentage point.
“ In December 2024, inflation in Kazakhstan rose to 8.6%, falling within the forecast range of 8-9% for 2024. The main contribution to this dynamic comes from the high increase in service prices and the observed acceleration of inflation in non-food goods since August. The rise in inflation occurs against the backdrop of the implementation of the "Tariff in Exchange for Investments" program and the weakening of the tenge. There is also consistent growth in the core part of inflation, indicating demand-side pressure due to ongoing fiscal stimulus. Public inflation expectations rose again in December, demonstrating high volatility,” the National Bank's press release dated January 17 states.
Current inflationary pressure remains elevated against high global food prices and accelerating inflation in Russia, according to the NBK. In developed economies, inflation has increased somewhat in recent months after a prolonged decline. Persistent inflation and a strong labor market are likely to affect the maintenance of tight external monetary conditions for a longer period. Thus, the US Federal Reserve expects a slower pace of rate cuts compared to September estimates.
The growth of the short-term economic indicator for 2024 accelerated to 6.2% year-on-year, which may indicate signs of overheating in the economy. Production growth is observed across all major sectors, with the highest growth seen in agriculture, construction, trade, and transportation. There is also an acceleration in the dynamics of the manufacturing sector.
Domestic demand exceeds supply capabilities and remains consistently high amid active fiscal stimulus, rising monetary incomes, and increased investments in the non-resource sector. This is confirmed by the growth in retail trade and consumer lending. The business activity indicator tracked by the National Bank has remained in positive territory for 11 consecutive months, according to the bank's announcement.
Pro-inflation risks persist. Externally, they are driven by higher inflation in Russia, while domestically, they stem from the continuation of reforms in the regulated price sector, the pass-through effect of the tenge's depreciation on prices, high domestic demand amid fiscal stimulus, unanchored inflation expectations, and rising consumer lending.
Overall monetary and credit conditions have somewhat eased due to the weakening exchange rate, rising inflation expectations, and the actual inflation dynamic. In this regard, at the next decision, during which the forecasts for key macroeconomic indicators will be updated, the NBK's monetary policy committee will assess the need for additional tightening of monetary policy to bring inflation back to a trajectory of sustainable reduction towards the target of 5%.
The next scheduled decision by the NBK on the base rate will be announced on March 7, 2025, at 12:00 Astana time.