Kazakhstan's central bank raised its key interest rate for the second time and said it would continue to pursue a disinflationary monetary policy while it assesses the effectiveness of its own anti-inflationary measures against the backdrop of the risk of reduced monetary stimulus by U.S. Federal Reserve and the European Central Bank (ECB).
The National Bank of the Republic of Kazakhstan (NBK) raised its base rate by another 25 basis points to 9.50 percent and has now raised it by 50 points following a hike in July in response to rising inflation.
Today's rate hike follows the central bank's warning in July that it was ready to take further measures to tighten monetary conditions based on this month's updated economic forecast.
The National Bank of the Republic of Kazakhstan (NBK) raised its base rate by another 25 basis points to 9.50 percent and has now raised it by 50 points following a hike in July in response to rising inflation.
Today's rate hike follows the central bank's warning in July that it was ready to take further measures to tighten monetary conditions based on this month's updated economic forecast.
NBK today forecast an average inflation rate of 7.5 to 8.5 percent in 2021 before it decelerates toward the upper limit of its target corridor of 4.0- 6.0 percent in 2022, helped by an expected decline in world food prices and government measures.
Inflation in Kazakhstan has risen in the last four months and hit 8.7 percent in August from 7.4 percent in January, with higher food prices the main driver of inflation.
In August food inflation hit 11.4 percent, an unusual situation for the summer and since April food prices have been higher than in the last 20 years, the bank said.
In response, the government has approved an Anti-Inflationary Response Package that aims to stabilize non-monetary inflation and reduce food inflation to 8 percent by the end of this year, NBK said.
On top of the rise in food prices, the central bank pointed to the global rise in food and raw materials, the recovery of consumer demand, and rising prices for electricity, gas and fuels.
Inflationary expectations are also rising and hit 8.8 percent in August, the bank said.
As in most countries, Kazakhstan's economy is recovering rapidly and it the first 7 months of the year the gross domestic product expanded 2.7 percent year-on-year, the bank said.
Additional pro-inflationary pressures emanate from transfers from the National Fund that reached 4.55 trillion tenge in 2021 as part of the anti-crises measures.
Kazakhstan's GDP grew an annual 2.3 percent in the second quarter of this year, up from a contraction of 1.4 percent in the first quarter, and NBK forecast economic growth this year of 3.5-3.8 percent compared with the June forecast of 3.6-3.9 percent.
For 2022 the central bank forecast growth of 4.1-4.4 percent, up from the previous forecast of 4.0-4.3 percent as the impact of the COVID-19 pandemic eases while oil and gas output rises due to a gradual relaxation of OPEC+ restrictions.
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