Monday, June 4, 2018

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.



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