The central bank of Kazakhstan left its base rate unchanged at 17.0 percent, saying the current level of savings rates at banks reflect the need to sustain demand for tenge-denominated assets in light of the current economic slowdown.
The National Bank of Kazakhstan, which has raised its rate by 500 basis points since introducing a new base rate in September last year, added there had been a stabilization in the currency preference of bank depositors and the central bank would continue to improve the attractiveness of the tenge as it seeks to change the preference of the population in favor of the national currency.
Banks in Kazakhstan saw depositors switch their funds to U.S. dollars as the economy came under pressure from the plunge in oil prices, putting pressure on the tenge's exchange rate.
The central bank then floated the tenge in August last year, as part of a shift to inflation targeting, resulting in an immediate drop in its value of around 25 percent. The National Bank responded with a new base rate in September of 12.0 percent, up from the largely indicative rate of 5.50 percent that had been unchanged since August 2012, and then a 400 basis point rate hike in October.
After postponing a scheduled meeting of its technical committee in November, the bank then raised the base rate by another 100 basis points in February to stabilize the tenge and restore confidence.
After falling in the wake of the free float, the tenge hit a low of almost 391 to the U.S. dollar in late January compared with 188 prior to the float last August. But since Jan. 21 the tenge has firmed and was trading at 343 to the dollar today, down less than 1 percent this year.
Kazakhstan's inflation rate, however, has continued to accelerate, hitting 15.2 percent in February, up from 14.4 percent in January and a 2015-high of 13.6 percent in December.
The central bank expects inflation to decelerate in the second half of the year and then reach the upper boundary of its target range of 6.0 to 8.0 percent by the end of the year.