Kazakhstan maintains rate as inflation pressures rise

      Kazakhstan's central bank kept its key policy rate steady, saying this decision was made to ensure that inflation returns to its target corridor as inflationary pressures, both internal and external, begin to rise.

      The National Bank of the Republic of Kazakhstan (NBK) left its base rate at 9.0 percent, unchanged since July 2020 when it lowered the rate for the second time last year after a first cut in April.
      Although NBK cut its base rate by a total of 300 basis points in April and July, the net change for last year only amounted to 25 basis points as the rate was raised by 275 basis points in March in an emergency policy moves to protect the exchange rate of the tenge, which came under pressure from a collapse in the prices of oil, the country's main export.

      Inflation in Kazakhstan rose to a 2020-high of 7.5 percent in December, up from 7.3 percent in November, with food prices rising 11.3 percent, driven by higher global and domestic prices.

     "Core inflation indicators indicate the acceleration of inflationary pressures," the central bank said, noting core inflation rose to 7.16 percent in December and inflation expectations remain elevated.

     In December NBK said its medium-term inflation forecasts had not changed significantly and inflation is expected to gradually slow toward the upper limit of its target band of 4.0 to 6.0 percent by the end of 2021.

     NBK said Kazakhstan's economy contracted by 2.6 percent in 2020, in line with its forecast, mainly due to lower output from mining, trade and transport.

     The central bank's own survey of businesses show improved sentiment and the business climate index rose to 4.2 percent in December from minus 1.3 percent in November.

     www.CentralBankNews.info

      
 

Kazakhstan holds rate, geopolitical risks limit cuts

      Kazakhstan's central bank kept its base rate steady but said growing geopolitical risks and "the persistence of uncertainty and the increased likelihood of external risks materializing limit the potential for lowering the base rate."
      The National Bank of the Republic of Kazakhstan (NBK) left its base rate at 9.0 percent, unchanged since July when it lowered it for the second time this year after a cut in April.
      Although NBK cut the rate by a total of 300 basis points in April and July, the net change for the year only amounts to 25 basis points as it raised the rate by 275 basis points in March in an emergency move to protect the exchange rate of the tenge that came under pressure from a collapse in the prices of oil, the country's main export.

      The central bank said its next policy decision in December would be based on updated forecasts of inflation and economic growth that will allow it to "assess the potential space for rate cuts given the achievement of the inflation target in 2021."

      Kazakhstan's tenge reacted negatively to the bank's decision, although this was largely expected, falling almost 0.5 percent to 430 to the U.S. dollar to be down 11.4 percent this year.

      The tenge has been very volatile this year and plunged 15 percent from March 3 to March 25. But helped by the March 10 rate hike and a rebound in oil prices, the tenge rebounded in May before resuming a steady decline from early June to October. 

      Kazakhstan's headline inflation rate stabilized at 7.0 percent in September and August and NBK said disinflationary factors were continuing to prevail due to subdued demand, declining real incomes and a slow recovery in business activity.

     Inflationary expectations have also declined, the bank added.

     Kazakhstan's economy shrank an annual 1.8 percent in the second quarter of this year, after growth of 2.7 percent in the first quarter and at the end of the third quarter gross domestic product had contracted by 2.8 percent although the economic recovery is continuing and the business climate index had turned positive in September after six months in the negative zone.

     Last month NBK forecast the economy would shrink between 2.0 and 2.3 percent in 2020 while inflation will reach the upper limit of its target band of 4.0 to 6.0 percent by the end of 2021.

Kazakhstan holds rate, economy seen shrinking in 2020

     Kazakhstan's central bank left its benchmark interest rate steady, but lowered its forecast for economic growth this year based on the deeper-than-expected fall in activity in the second quarter and the extension of the lockdown over the COVID-19 pandemic during the first half of August.

     The National Bank of Kazakhstan (NBK) kept its base rate at 9.0 percent but has lowered the rate by a total of 300 points this year following cuts in April and in July. But in net terms the rate has only been cut 25 basis points this year as the rate was raised by 275 basis points in am emergency move in March to protect the tenge.

     In its statement, NBK said the current base rate will allow it to control inflation and ensure a smooth deceleration toward its target in the medium term.

      Inflation in Kazakhstan eased to 7.0 percent in August from 7.1 percent in July, with consumer prices pushed up by higher food costs and is expected to accelerate to 8.0 percent, closer to the lower limit of the previous forecast of between 8.0 and 8.5 percent, the bank said.

     It added the pass-through from a depreciation of the tenge's exchange rate was offset by suppressed consumer demand for non-food products and a slowdown in the price of gasoline and diesel prices.

     The tenge plunged 15 percent against the U.S. dollar in March but then rebounded in April as oil prices bottomed and began to rise. But since early June the tenge has been falling and was trading at 424 to the dollar today, down 10 percent since the start of 2020.

      Weakly-anchored inflation expectations, higher volatility in financial markets amid "growing sanctions rhetoric against Russia", an expected slow recovery of demand for oil and any further fiscal or quasi-fiscal stimulus present risks of higher inflation, the bank said.

      But disinflationary pressures come from lower economic activity, a slowdown in consumer demand and the expected decline in global food prices will limit inflation, NBK said, adding inflation in 2021 is expected to gradually slow and reach the the upper limit of its target band of 4.0 to 6.0 percent by the end next year.

      Kazakhstan's economy shrank by an annual 2.9 percent at the end of July and NBK forecast a contraction for the full year of 2.0 to 2.3 percent, down from an earlier forecast of a 1.8 percent drop, noting a deeper than expected contraction in the second quarter and the extension of the lockdown for the first two weeks of August.

Kazakhstan holds rate but doesn't exclude further cuts

     Kazakhstan's central bank left is base rate steady for the second time after slashing it at an extraordinary meeting in early April, and said a further easing of monetary conditions was not excluded if uncertainty over key external trends, such as the price of oil, commodity prices and the world economy, continues to ease.
     The National Bank of Kazakhstan (NBK) maintained its base rate at 9.50 percent after cutting it by 250 basis points at an extraordinary policy meeting on April 3. At the regular policy meeting on April 27 the rate was then kept steady.
    The rate cut in early April followed an emergency rate hike of 275 points on March 10 to limit inflation from a fall in the value of the tenge so the net change in its rate this year amounts to an increase of 25 points.
     Although the impact of the COVID-19 pandemic continues to have a negative impact on Kazakhstan's economy, NBK said oil and financial markets were improving and the consumption of oil was beginning to rise gradually amid signs of an economic recovery in China and the easing of quarantines in some European countries and the U.S.
     Measures to prevent the spread of the virus in Kazakhstan are also being gradually eased and while there has been a slight recovery in business activity in May from April, demand remains depressed, investment activity is slowing and economic activity is still negatively impacted.
     NBK estimated Kazakhstan's gross domestic product would shrink 1.8 percent this year due to the negative impact of lower domestic demand and exports, even with fiscal stimulus.
     But the central bank also said it expects investment activity to recover as domestic and external demand improves along with higher prices in global commodity markets.
    Kazakhstan relies on oil for some 75 percent of its exports and the central bank noted the agreement by Opec + to extend the oil production cuts by 9.7 million barrels per day until the end of July 2020.
    The tenge has been on a roller coaster ride this year, plunging 15 percent against the U.S. dollar from March 1 to April 4 in response to the fall in oil prices and the pandemic.
    But since the rate cut in early April, the tenge has bounced back and risen 13 percent since its low on April 4 to 397.3 today. The tenge firmed further in the wake of today's policy decision and is now 4.1 percent below its level at the start of the year.
    Despite the rise in oil prices since the collapse in mid-April and reduced imports, the central bank expects a significant deterioration in its current account this year due to lower prices and production of oil and metals along with a decrease in global demand for its products due to the global economic slowdown.
     The central bank said a widening of the current account deficit would result in "significant pressures on the tenge exchange rate."
     Inflation in Kazakhstan accelerated in the first few months of this year to 6.8 percent in April but eased to 6.7 percent in May, above NBK's target range for 2020 and 2021 of 4-6 percent.
     The main reason for the rise in inflation was due to higher prices for food, which rose an annual 10.7 percent in May, the highest rise since October 2016.
      Based on an upward revision of its forecast for oil prices this year to $35-$40 per barrel from an earlier forecast of $20-$25, the central bank expects inflation this year of 8.0-8.5 percent, down from the April forecast of 9-11 percent.
      It added inflationary expectations in Kazakhstan remain relatively stable at 6.0-6.2 percent for this year even if they remain weakly anchored, which could put pressure on prices in the short term.

     www.CentralBankNews.info

Kazakhstan maintains rate after 200 bps hike, FX moves

     Kazakhstan's central bank left is base rate steady at 12.0 percent, saying it considers a significant deterioration in the prospects for the global economy, lower demand and increased volatility in commodity markets "a new economic reality," and global growth in 2020 may be the worst since 2008.
     The National Bank of Kazakhstan (NBK) said its unscheduled 200 basis point rate hike on March 10 helped lower the spread of panic in financial markets and limit the emerging risks to inflation and protect the value of assets in the tenge currency.
     At the same time, its decision to widen the interest rate corridor to 1.5 percentage points on either side of the rate had eased speculative pressure on the exchange rate and raised the cost of tenge borrowing by banks to 13.5 percent.
     On top of the outbreak of the coronavirus, oil prices plunged on March 9 following the failure of OPEC-plus, which includes the non-OPEC nations of Russia, Kazakhstan and Mexico, to reach an agreement, hitting Kazakhstan's tenge hard.
     Oil accounts for some 75 percent of Kazakhstan's exports and around one-third of its gross domestic product.
     Last week's unscheduled rate hike was aimed at maintaining price stability, and NBK said it remains committed to a floating exchange rate regime as part of its inflation targeting policy framework.
      This policy is also aimed at reducing the impact of external shocks on the country's economy, ensure macroeconomic stability and protect tenge assets.
      However, if necessary the central bank said it will also carry out interventions to stabilize the financial system and between March 10 and March 13 NBK intervened to absorb some of the negative impact on the exchange rate from the change in external conditions.
      From March 6 to March 13 the value of the tenge fell 6.1 percent to 405.62 tenge per dollar, NBK said.
      Today the tenge was stable around 406.5 to the dollar, down 7.5 percent since a 2020 high on Feb. 24 and down 6.3 percent since the start of this year.
       The unfolding price war between Russia and Saudi Arabia has led to a 50 percent collapse in crude oil prices since the start of this year, hitting the currencies of oil-exporting nations.
      NBK has revised its forecast for Brent crude to $35 per barrel from $60 and based on the new realities of the global economy there is an increased risk that inflation may exceed its upper limit of its target corridor in 2020.
      NBK targets inflation of 4-6 percent and in February inflation rose to 6.0 percent from 5.6 percent.
      The central bank said it reserved the right to continue to smooth out fluctuations in financial markets, including the foreign exchange markets, that threaten price and financial stability and was ready to adopt additional measures if the global economy worsens.

     www.CentralBankNews.info

Kazakhstan maintains rate, inflation seen in range in 2020

     Kazakhstan's central bank left its base rate unchanged at 9.25 percent, saying the current monetary conditions are considered sightly restrictive due to the need for measures to limit the impact on inflation and exchange rate expectations from a widening current account deficit.
     The National Bank of Kazakhstan (NBK), which raised its rate in September by 25 basis points and thus unwound a rate cut in April, added expanding consumer demand and accelerating economic growth remain the main pro-inflationary factors but the current base rate should keep inflation within the target corridor fo 4-6 percent this year and in 2020.
     Kazakhstan's inflation rate eased to 5.4 percent in November from 5.5 percent, with food prices still the main contributor to inflation, hitting a 2019-high of 9.7 percent in October.
     Inflationary expectations among the population also rose slightly to 5.8 percent in November from 5.6 percent, with 54.7 percent of those surveyed expecting inflation of the same growth rate over the next 12 months or a slowdown in price growth.
      Inflation by the end of this year is forecast in the range of 5.5-5.7 percent, with inflation decelerating to 5.0-5.5 percent by the end of 2020, with the main factors driving inflation still the fiscal stimulus and the positive output gap.
     During the first quarter of next year NBK said inflation could approach the upper level of its target due to an increase in regulated tariffs and prices for some food items.
     Kazakhstan's economy expanded by 4.3 percent in the first 9 months of the year, up from a rate of 4.1 percent in the first 8 months, with investments growing 8.2 percent and real wage growth rising to 12 percent in the third quarter.
      NBK estimated 2019 growth of 4.2 percent and 3.8 percent in 2020, with the main factors still rising consumer demand from high incomes, higher investment demand due to infrastructure projects and other investment projects, and higher exports of oil and gas sector products.
     The Kazakstani tenge has appreciated since mid-October, partly reversing a steady decline since March 2018, and was trading at 385.9 to the U.S. dollar today, still down 2.6 percent this year.

     www.CentralBankNews.info

   

Kazakhstan maintains rate as inflation seen in target

     Kazakhstan's central bank left its base rate steady at 9.25 percent and reiterated its forecast for inflation to end this year around 5.7 to 5.8 percent and then settle within its target corridor of 4.0 to 6.0 percent until the end of 2020.
     The National Bank of the Republic of Kazakhstan (NBK) also reiterated its guidance from last month that future policy decisions would be based on how inflation evolves in comparison with its target.
     NBK raised its rate by 25 basis points in September, unwinding a rate cut in April and returning the rate to its level seen from October 2018 to March 2019.
     Kazakhstan's inflation rate eased to 5.3 percent in September from 5.5 percent in August while core inflation, which excludes the prices of fruits and vegetables, regulated services and energy, eased to 7.7 percent from 7.9 percent.
     The growth in food prices accelerated in September to 9.1 percent, mainly due to higher domestic prices pulled up by higher world market prices, and meat and meat product prices were up 13.5 percent year-on-year.
     But inflationary expectations did not change significantly, the NBK said, and over the next 12 months inflation is seen at 5.4 percent.
     Business activity is also continuing to growth, with short-term economic indicators up 4.7 percent in the first 9 months of the year and investments up 9.7 percent.
     The tenge has firmed in recent days and was trading at 388.6 to the U.S. dollar today but is still down 3.3 percent since the start of this year.

    www.CentralBankNews.info

Kazakhstan raises rate 25 bps as inflation tops forecast

     Kazakhstan's central bank lived up to its guidance from July and raised it base rate by 25 basis points to 9.25 percent as inflation is above expectations and said future policy decisions will be based on how inflation is expected to develop with respect to the bank's 4.0 to 6.0 percent target corridor.
    The rate hike by the National Bank of the Republic of Kazakhstan (NBK) follows a 25-basis-point rate cut in April and brings the rate back to the level seen from October 2018 to March 2019.
    Kazakhstan's inflation rate declined to 5.2 percent in August from 5.4 percent in July but the central bank expects inflation to rise toward the top of its target corridor at 5.7 to 5.8 percent by the end of this year due to robust consumer demand, price increases on certain foods and the waning effect of lower tariffs on regulated services, which it said creates the risk of inflation exceeding the upper bound of the target corridor.
     Raising the base rate now will help increase the attractiveness of the tenge currency, reducing the risk of higher inflation from import prices, NBK said, adding during 2020 inflation is then expected to decelerate and settle within its target corridor.
     Economic growth in the first 7 months of the year is forecast at 4.2 percent by the NBK, which creates inflationary pressure and is above expectations.
     For the full year, NBK forecast growth of 3.8 percent before slowing to 3.5 percent in 2020, with expanding household consumption and growth in investment the main drivers. Economic growth will then ease due to weaker fiscal stimulus and net exports.
     The central bank added that during the next week it will release an inflation report that will contain a detailed analysis of the main macroeconomic factors affecting inflation to increase transparency and improve its communications.
     Kazakhstan's tenge firmed in the wake of the rate hike to 384.5 to the U.S. dollar but has depreciated since steadily since September 2018 and is 2.3 percent down since the start of 2019.

    www.CentralBankNews.info

 

Kazakhstan cuts rate 25 bps, inflation expectations ease

     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.

     www.CentralBankNews.info
   
 

This week in monetary policy: Kazakhstan, South Korea, Tajikistan and Uzbekistan

    This week - April 14 through April 20 - central banks from 4 countries or jurisdictions are scheduled to decide on monetary policy: Kazakhstan, South Korea, Tajikistan and Uzbekistan.

    Following table includes the name of the country, the date of the next policy decision, the current policy rate, the result of the last policy decision, the change in the policy rate year to date, and the rate one year ago.

    The table is updated when the latest decisions are announced and can always accessed by clicking on This Week.

WEEK 16
APR 14 - APR 20, 2019:
COUNTRY	DATE	RATE	LATEST	YTD	1 YR AGO
KAZAKHSTAN	15-Apr	9.25%	0	0	9.25%
SOUTH KOREA	18-Apr	1.75%	0	0	1.50%
TAJIKISTAN	18-Apr	14.00%	0	0	14.00%
UZBEKISTAN	20-Apr	16.00%	0	0	14.00%

    www.CentralBankNews.info

Kazakhstan holds rate steady after inflation eases

    Kazakhstan's central bank left its base rate unchanged at 9.25 percent, saying its concern over a deterioration of external factors did not materialize in the last 6 weeks and in the absence of shocks inflation this year should remain close to the upper boundary of its inflation target.
     It its previous policy decision from Jan. 14, the National Bank of Kazakhstan (NBK) warned it may raise its rate today if there was upward pressure on inflation from volatile oil markets and import prices from Russia.
     In October last year the NBK raised its rate by 25 basis points and monetary conditions are currently neutral.
     However, after a run-up in January, oil prices have stabilized since mid-February and Kazakhstan's headline inflation rate fell further to 4.8 percent in February, below the middle point of NBK's 2019 target corridor of 4.0 to 6.0 percent, from 5.2 percent in January and 5.3 percent in the previous 3 months.
    NBK has been lowering its inflation target in recent years, from 6.0-8.0 percent in 2016/17 to 5.0-7.0 percent in 2018 and 4.0-6.0 percent for this year, targeting inflation below but close to 4.0 percent by the end of 2020 and following years.
    Along with the lower inflation target, the central bank said inflationary expectations had gradually declined after a surge in late 2018 and were down to 4.7 percent for the next 12 months.
     While the probability of a deterioration of the external situation had declined, the central bank cautioned the nature of a slowdown in inflation in February was unstable, with food inflation accelerating to 6.6 percent in February from 5.1 percent in December 2018.
     At the same time, economic growth has slowed this year, with the short-term indicator for January showing a 2.9 percent rise, down from 4.7 percent in 2018.
     But household consumption and consumer lending is improving and expected to continue to grow this year, supported by fiscal incentives, but the impact on inflation is not seen as high and doesn't require an immediate monetary policy response, the central bank said.
     Last month Kazakhstan's president, Nursultan 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 follows 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.
     Kazakhstan's economy is in the midst of a major transformation that aims to reduce the footprint of the state and the economy's reliance of oil following the fall in oil prices in 2014, which hit growth sharply in 2015 and 2016.
     Akishev, who took over as NBK chairman in 2015, had focused on adopting a floating exchange rate after using a dollar peg for decades and introducing an inflation targeting regime.
     In the first 9 months of 2018 Kazakhstan's gross domestic product grew 4.2 percent and the International Monetary Fund has forecast average growth of 3.7 percent in 2018, down from 4.0 percent in 2017, and growth of 3.2 percent in 2019 and 2020.
     The exchange rate of the tenge, which often moves in synch with the Russian ruble, fell steadily last year but has stabilized in the last month.
     Today the tenge was trading at 376.6 to the U.S. dollar, down 0.2 percent this year.

Kazakhstan maintains rate but may tighten in March

     Kazakhstan's central bank kept its base rate steady at 9.25 percent but warned it may raise its rate in March if oil markets remain volatile amid improving domestic demand and upward pressure on import prices from Russia.
     The National Bank of Kazakhstan (NBK), which raised its rate in October 2018, said it still expects inflation to remain within the upper range of its new and lower inflation target for 2019 in the absence of any significant shocks.
     However, NBK said there was upward pressure on inflation from higher oil prices, a potential for inflationary pressure on domestic prices from imports from Russia, where inflation is estimated to rise further, and an expansion in domestic demand from fiscal incentives.
     "Anchoring inflationary expectations around the current level and improving their resistance in the short term remains an important objective of the National Bank of Kazakhstan," NBK said, underscoring that preventing inflation from exceeding its target remains a "high priority."
     Headline inflation in Kazakhstan, where oil accounts for around 60 percent of exports, was steady for the third month in a row in December at 5.3 percent but core inflation rose for the second month to 6.4 percent, above a 2018-low of 6.07 percent in August and 6.2 percent in December 2017.
     The NBK has lowered its inflation target in recent years from 6.0-8.0 percent in 2016/17 to 5.0-7.0 percent in 2018 and 4.0-6.0 percent in 2019.
     By the end of 2020 and following years NBK wants to lower inflation to close to 4.0 percent.
     The NBK's 25-basis points rate hike in October last year came after it kept the rate unchanged from June when it wrapped up a two-year easing campaign in which it lowered the rate by a total of 800 points.
     NBK said current conditions still allow it to keep its monetary policy stance close to neutral, a level that maintains a balance between reaching its inflation target and keeping economic growth close to its potential level.
     But there is considerable uncertainty regarding the future outlook, NBK said, and domestic demand is rising due to growing real income while consumer lending was still up 11 percent year-on-year in November 2018 despite slowing slightly.
     Kazakhstan's economy is in the midst of a major transformation that aims to reduce the footprint of the state and the economy's reliance of oil following the fall in oil prices in 2014, which hit growth sharply in 2015 and 2016.
      In the first 9 months of 2018 Kazakhstan's gross domestic product grew 4.2 percent and the International Monetary Fund has forecast average growth of 3.7 percent in 2018, down from 4.0 percent in 2017, and growth of 3.2 percent in 2019 and 2020.
     The exchange rate of the tenge, which often moves in synch with the Russian ruble, fell steadily last year and has continued to decline this year. Today the tenge was trading at 379.2 to the U.S. dollar, down 1.6 percent this year and down 12.2 percent since the start of 2018.

Kazakhstan maintains rate at neutral as inflation eases

     Kazakhstan's central bank kept its base rate at 9.25 percent, a level it said was neutral, helping ensure that inflation, which has declined in the last two months to the lower end of its current target range, will be within its new and lower target range of 4.0 to 6.0 percent in 2019.
     The National Bank of Kazakhstan (NBK), which raised its rate by 25 basis points in October after cutting four times earlier in the year by 125 basis points, confirmed its forecasts for inflation to be close to the upper limit of its 2019 target range before smoothly declining in the first half of 2020.
     Over the length of its forecast horizon to mid-2020, inflation is seen between 5.0 and 5.5 percent.
     The NBK has lowered its 2019 inflation target range to 4.0-6.0 percent from the current range of 5.0-7.0 percent and in November and October inflation was steady at 5.3 percent, sharply below September's 6.1 percent.
     NBK said future decisions on the base rate would be based on the challenges of reaching a medium-term inflation target below 4.0 percent by the end of 2020, adding an important task in improving the effectiveness of its monetary policy is to improve the predictability of the target rate.
     Despite the decline in inflation, NBK said overall inflationary pressures still remain quite high, reflected in a rise in October core inflation to 6.3 percent from 6.2 percent in September. Inflation expectations are also estimated to be above inflation though declining.
     The main risks to inflation stem from uncertainty over oil prices, inflation among major trading partners and higher domestic demand that will be boosted by an expected rise in minimum wages.
     Business activity is also continuing to grow while consumer lending was up 12.9 percent year-on-year in October, with loans for consumption up by 25.4 percent.
     Kazakhstan's tenge, which often reacts to changes in Russia's ruble, has been relatively stable in the last month after falling sharply earlier this year, hit by worries over new U.S. sanctions on Russia and the general rise in the U.S. dollar.
     The tenge was trading at 370.4 to the dollar today, down 10.1 percent this year.
     Kazakhstan is in the midst of a major transformation of its economy that aims to reduce the footprint of the state after a tough economic environment following the decline in oil prices in 2014. Oil accounts for some 60 percent of the country's exports.
     The rise in oil prices has provided some breathing space to diversify the country's economy, the International Monetary Fund (IMF) said last week, adding the challenges include continuing the development of an inflation-targeting framework, moving decisively past long-standing weakness among Kazakhstan's banks, scaling back fiscal support while boosting non-oil revenue, addressing fiscal risks and fostering the emergence of new sources of private sector growth.
     The IMF said Kazakhstan's economy grew 4.2 percent in the first half of this year, led by manufacturing, oil and a recovery of credit growth, and forecast average gross domestic product growth this year of 3.7 percent, down from 4.0 percent in 2017, and 3.2 percent in 2019 and 2020.
     The rise in exports, especially oil, has supported an improvement in the current account and in the medium term the IMF projects a pickup of non-oil growth to 4 percent.
    The current account deficit is seen narrowing to 0.7 percent of GDP this year from 3.4 percent in 2017 and then further to a deficit of 0.3 percent in 2019 and 0.4 percent in 2020.
     Consumer price inflation is seen averaging 6.2 percent this year, down from 7.1 percent last year, then 5.5 percent in 2019 and 4.4 percent in 2020.

     www.CentralBankNews.info

Kazakhstan raises rate 25 bps on risks of higher inflation

      Kazakhstan's central bank raised its base rate by 25 basis points to 9.25 percent due to an increase in the risks of higher inflation from the tenge's depreciation, with future decisions about the base rate dependent on how inflation compares with the bank's target.
      It is the first rate hike by the National Bank of Kazakhstan (NBK) since February 2016 when the base rate was raised to 17.0 percent to curb rising inflation which hit 17.7 percent in July that year.
      In May 2016 the NBK began lowering the rate and remained in an easing stance until June this year when it switched to a neutral policy stance.
       Between May 2016 and June 2018 the NBK cut its base rate by a total of 800 basis points, including four cuts this year by a total of 125 points.
      But in September the central bank said inflation was falling slower than it had expected while economic activity was continuing to strengthen and the tenge was depreciating.
      While the central bank said it was maintaining the current interest corridor of 1 percentage points plus/minus around the base rate, it also said it was considering narrowing the boundaries of the corridor to improve the operational effectiveness of its monetary operations so the tenge overnight rate, TONIA, will remain within the target corridor and converge to the target rate.
       Headline inflation in Kazakhstan rose to 6.1 percent in September from 6.0 percent in August - a level the central bank described as moderate - and is forecast to remain within the 2018 inflation target of 5.0 - 7.0 percent.
       In 2019 the central bank said it expects inflation to "smoothly enter the new corridor" of 4.0 - 6.0 percent and remain close to the upper limit of 6.0 percent.
       An increase in exchange rate volatility had triggered a rise in inflationary expectations to 6.4 percent in September from 5.6 percent in July and domestic demand is continuing to expand due to rising incomes.
       An increase in the minimum wage will add inflationary pressure while a economic activity remains above the country's potential, the NBK said, adding the higher base rate will help increase the demand for tenge assets and help keep monetary conditions close to neutral.
       In April this year the tenge was hit by worries over a fallout of new U.S. sanctions on Russia and since then it has continued to depreciate as U.S. interest rates rise.
      Today the tenge was trading at 368.3 to the U.S. dollar, down 9.6 percent this year.
       In August 2015 the tenge plunged following the central bank's move to a floating exchange rate regime in response to capital outflows and the conversion of many tenge bank deposits to foreign currency. Oil accounts for about 60 percent of Kazakhstan's exports and over 10 percent of its Gross Domestic Product. 

     www.CentralBankNews.info

 

This week in monetary policy: Kazakhstan, Hungary, South Korea and Chile

    This week - October 14 through October 20 - central banks from 4 countries or jurisdictions are scheduled to decide on monetary policy: Kazakhstan, Hungary, South Korea and Chile.

    Following table includes the name of the country, the date of the next policy decision, the current policy rate, the result of the last policy decision, the change in the policy rate year to date, the rate one year ago, and the country’s MSCI classification.

    The table is updated when the latest decisions are announced and can always accessed by clicking on This Week.

WEEK 42
OCT 14 - OCT 20, 2018:
COUNTRY	DATE	RATE	LATEST	YTD	1 YR AGO
KAZAKHSTAN	15-Oct	9.00%	0	-125	10.25%
HUNGARY	16-Oct	0.90%	0	0	0.90%
SOUTH KOREA	18-Oct	1.50%	0	0	1.25%
CHILE	18-Oct	2.50%	0	0	2.50%

    www.CentralBankNews.info

Kazakhstan holds rate, sees inflation staying near 6%

     Kazakhstan's central bank left its base rate at 9.0 percent, saying inflation is declining slower than expected and is likely to remain near the upper range of its forecast of 4.0 to 6.0 percent in 2019 but may then fall below the lower range by end of 2020.
      In a televised press conference, Daniyar Akishev, chairman of the National Bank of Kazakhstan (NBK), said a recovery of domestic demand along with external factors accounted for the current pressures on inflation.
      Kazakhstan's inflation rate rose slightly to 6.0 percent in July from 5.9 percent in June, within the NBK's target range of 5.0 to 7.0 percent.
      Akishev said inflation expectations are in a long-term decline despite monthly variations and survey results from July show expectations of inflation in 12 months of 5.6 percent.
       Economic activity in Kazakhstan is also continuing to improve, with short-term data indicating economic growth of 4.9 percent in the January to July period, supported by growth in mining and processing, industry, transport, communications and trade.
      Investments in fixed assets, especially in the oil and gas industry, rose by 23.7 percent in the first seven months of this year and expectations for further growth remain at a high level, Akishev said, adding that consumer demand is also continuing to growth due to higher wages and state spending.
      However, he also did not exclude a slowdown in 2019 due to the high base this year.
      In the first half of this year, Kazakhstan's Gross Domestic Product grew by an annual rate of 4.1 percent.
      Looking abroad, Akishev said the balance of risks had shifted to the negative side and while oil prices remain at relatively high levels, this cannot compensate for the uncertainty stemming from the relationship between the largest economies in the world.
       Global food prices fell 3,.7 percent in July but Akishev said this decline should be short-living as global consumption remains on a stable long-term rising trend.
       U.S. policy of boosting economic growth along with the Federal Reserve's interest rate increases is leading to a flow of capital away from developing countries, weakening their currencies and putting inflationary pressures on emerging markets, he added.
       Kazakhstan't tenge has depreciated steadily this year and was trading at 365.8 to the U.S. dollar today, down 9 percent this year.

     www.CentralBankNews.info
     

Kazakhstan maintains rate, limited potential for easing

      Kazakhstan's central bank left its base rate at 9.0 percent, as it signaled last month, and said the risks to inflation in the short and medium term, especially from the external sector and fiscal policy, would limit the potential for further monetary easing this year.
      The National Bank of Kazakhstan (NBK), which has cut its rate by 125 basis points this year, added inflation was forecast to remain within the bank's target corridor this year and 2019.
      In June the NBK said monetary conditions had reached a neutral level, signaling it was ready to shift into a neutral policy stance after cutting the rate by a total of 800 basis points since May 2016.
      While the NBK in June also noted the reduced potential for further rate cuts due to a slowdown in the downward trend in inflation and higher inflationary risks, it added that monetary conditions might be tightened to reduce inflationary expectations.
      Today the NBK said monetary conditions continue to be maintained at a neutral level but the operational benchmark of monetary policy - the tenge overnight index average known as TONIA - was closer to the lower boundary of the rate corridor.
       The central bank would therefore consider narrowing the corridor in the second half of the year to increase the operational efficiency of regulating monetary and credit conditions.
      Last month the International Monetary Fund (IMF) noted Kazakhstan's economy was continuing to recover from the shock of lower oil prices and slower economic growth in its main trading partners and strong exports of oil and metals was now boosting activity, helping narrow the current account deficit while inflation has remained within the central bank's target range.
       The IMF also said the central bank's rate cuts had been appropriate and consistent with keeping real interest rates close to neutral level and going forward the NBK should resist calls for accommodation and the balance of risks warrant a "cautious approach to further easing."
      Kazakhstan's inflation rate eased to 5.9 percent in June from 6.2 percent in May, mainly due to seasonal trends in agricultural food markets and continued slowdown in domestic prices.
      The NBK targets inflation of 5 -7 percent and based on a comparison with the third quarter of last year the central bank expects a noticeable slowdown in inflation by the end of this year.
      Inflationary expectations for the year ahead in June was steady at 6 percent, the same as in May and February while changes in March and April reflected market conditions, NBK said.
      Economic activity remains positive, with all major industries contributing to growth in excess of the country's potential in the first five months, supported by higher domestic demand and investment and external demand, which introduces inflationary pressures.
      While oil prices are continuing to have a positive impact on economic activity, NBK said international food prices dropped in June for the first time this year due to increased trade tension between countries.
      Although cereals prices fell, the central bank said production prospects had deteriorate, strengthening the inflationary background and further inflationary pressures are possible due to higher inflation in its main trading partners.
       During June the tenge continued to depreciate against a firmer U.S. dollar, with the volume of short-term notes from the central bank from non-residents easing to 241 billion tenge from 454 billion in March, a further factor in weakening the exchange rate, NBK said.
      Today the tenge was trading at 343.9 to the dollar,  down 3.2 percent this year.

      www.CentralBankNews.info

   

This week in monetary policy: Kazakhstan, Israel, Argentina, Malaysia, Poland, Canada, South Korea, Serbia, Ukraine & Peru

    This week - July 8 through July 14 - central banks from 10 countries or jurisdictions are scheduled to decide on monetary policy: Kazakhstan, Israel, Argentina, Malaysia, Poland, Canada, South Korea, Serbia, Ukraine and Peru.

    Following table includes the name of the country, the date of the next policy decision, the current policy rate, the result of the last policy decision, the change in the policy rate year to date, the rate one year ago, and the country’s MSCI classification.

    The table is updated when the latest decisions are announced and can always accessed by clicking on This Week.

WEEK 28
JUL 8 - JUL 14, 2018:
COUNTRY	DATE	RATE	LATEST	YTD	1 YR AGO
KAZAKHSTAN	9-Jul	9.00%	-25	-125	10.50%
ISRAEL	9-Jul	0.10%	0	0	0.10%
ARGENTINA	10-Jul	40.00%	0	1125	26.25%
MALAYSIA	11-Jul	3.25%	0	25	3.00%
POLAND	11-Jul	1.50%	0	0	1.50%
CANADA	11-Jul	1.25%	0	25	0.75%
SOUTH KOREA	12-Jul	1.50%	0	0	1.25%
SERBIA	12-Jul	3.00%	0	-50	4.00%
UKRAINE	12-Jul	17.00%	0	250	12.50%
PERU	12-Jul	2.75%	0	-50	3.75%

    www.CentralBankNews.info

Kazakhstan cuts rate 25 bps but signals easing pause

      Kazakhstan's central bank lowered its base rate by another 25 basis points to 9.0 percent, as it signaled in April, but said monetary conditions were now at a neutral level and the risks that will limit the rate of decline in inflation this year and next year would restrain further rate cuts this year.
      It is the fourth consecutive rate cut by the National Bank of Kazakhstan (NBK) and the rate has now been cut by a total of 125 basis points this year. Since May 2016, when the central bank embarked on an easing cycle, the base rate has been lowered by 800 points.
      Today's rate cut was in response to the continued decline in inflation and inflation expectations as well as favorable trends in world oil markets, NBK Governor Daniyar Akishev told a televised press conference.
      Kazakhstan's inflation rate eased to 6.2 percent in May from 6.5 percent in April, within the central bank's target range of 5-7 percent, and against the backdrop of a weakening of the tenge's exchange rate and a decline in inflation expectations 12-months ahead to 6.0 percent.
      Akishev said the latest estimates show that inflation will remain within the target corridor this year and in 2019 and reach the medium-term inflation target of 4.0 percent by end-2020.
      The main factor that will limit the decrease in inflation is the expected rise in world food prices, imported inflation from trading partners and growth in consumer and investment demand.
      The normalization of U.S. monetary policy is also posing a risk of an outflow of capital from emerging markets, Akishev added.
      The tenge was hit in early April by a fall in Russia's ruble on new U.S. sanctions but has stabilized since then. Russia is Kazakhstan's largest trading partner.
      The tenge was trading at 330.9 to the dollar today, up 0.6 percent this year.
      The central bank said its international reserves amounted to US$90.4 billion, up 1.4 percent.

        www.CentralBankNews.info

       
     
   

Kazakhstan cuts rate 25 bps and will continue easing

      Kazakhstan's central bank lowered its base rate by another 25 basis points to 9.25 percent and said  it "will continue the policy of the gradual reduction of the base rate, securing the maintenance of the neutral monetary conditions."
      It is the third rate cut in a row by the National Bank of Kazakhstan (NBK) and in line with the central bank's guidance from March that it would continue to gradually reduce its base rate toward a neutral policy stance, in which there is a balance between the pursuit of price stability and economic growth.
      The rate cut comes after the central bank last week confirmed its economic outlook and said there was a high likelihood that inflation this year would ease to below the lower boundary of its 5-7 percent target range.
      The NBK has now cut its key rate by 100 basis points this year and by a total of 775 points since embarking on an monetary easing cycle in May 2016.
       Inflation in Kazakhstan rose slightly to 6.6 percent in March from 6.5 percent in February due to a rise in the cost of some imported products based on world market prices along with an "emerging increase of the domestic demand among households," NBK said.
       However, inflationary expectations are continuing to decline, with expectations for one-year ahead down to 5.8 percent in March from 7.1 percent in December.
       The exchange rate of Kazakhstan's tenge also remains favorable, the central bank said, noting oil prices are above US$65 per barrel while inflation in its main trading partners is moderate.
       Despite the recent hit to Russia's stock market from new U.S. sanctions, the NBK said it still sees the external sector as positive and the recent volatility in the tenge's exchange rate in response to the fall in Russian assets was considered "short-term and moderate."
       "This is why the National Bank does not consider it necessary to tighten the monetary policy conditions as a response to tenge deprecation," the central bank said.
       The tenge fell by up to 3.8 percent last week on worries over Russia but was still trading at 329.2 to the U.S. dollar today, 1.1 percent higher than at the start of the year.
       In August 2015 the tenge plunged following the central bank's move to a floating exchange rate regime and has been relatively steady since May 2016 when the central bank started cutting rates.
      The NBK moved to a floating exchange rate regime in response to capital outflows and the conversion of many tenge bank deposits to foreign currency. Oil accounts for about 60 percent of Kazakhstan's exports and over 10 percent of its Gross Domestic Product. 
       Economic activity in Kazakhstan is continuing to strengthen on the back of broad-based growth in such sectors as mining of oil and iron ore, engineering, agriculture, trade and transportation.
       Despite a 4.5 percent decline in building industry in January-February, the central bank said fixed capital investments had expanded by 54.4 percent in the first two months.
       Gross Domestic Product grew by an annual rate of 4.0 percent in the fourth quarter of last year and in its inflation report from February the central bank forecast 2.9 percent growth this year and 2.8 percent in the first nine months of 2019.