Monday, October 25, 2021

Kazakhstan raises rate 3rd time to curb inflation

      Kazakhstan's central bank raised its benchmark interest rate for the third time and said it would continue to normalize is monetary policy stance and pursue a disinflationary policy to ensure inflation returns to its target range in 2022 amidst higher domestic and external inflationary pressures.
     The National Bank of the Republic of Kazakhstan (NBK) raised its base rate by another 25 basis points to 9.75 percent and has now raised it 75 points following earlier hikes in July and September.
      With the interest rate corridor of plus/minus 1 percentage point, NBK's interest rate on providing liquidity will now be 10.75 percent and the rate on withdrawing liquidity 8.75 percent, the bank said.
      NBK was among a few central banks that raised rates in early 2020 - in March - to curb inflation but then had to change course sharply and ease policy the following month as the COVID-19 pandemic practically shut down the global economy.
      NBK cut its rate twice and by a total of 3 percentage points in April and July 2020 and maintained the rate until July this year when inflation began to accelerate.
     Kazakhstan's inflation rates rose to 8.9 percent in September from 8.7 percent in August, above the central bank's target corridor of 4.0 to 6.0 percent and above the bank's forecast for this year of inflation of 7.5 to 8.5 percent 
     "The external inflationary background remains unfavorable," the central bank said, adding inflation in its trading partners remains elevated due to high food prices, supply chain disruptions, rising transportation costs, raw materials and energy costs along with a rebound in domestic demand.
      The recovery of the country's economy is in line with NBK's expectations, with growth at the end of 9 months of 3.4 percent as the transportation sector for the first time since March last year showing positive growth rates.
      "According to the optimistic scenario, economic growth this year will amount to 3.7-4.0 percent," NBK said.
      Consumer activity is recovering while the pandemic situation is. improving and after a slight slowdown in July and August, retail sales grew 5.6 percent year-on-year in September.
       For the first 8 months of the year, nominal income grew a real 4.9 percent, helping push up consumer imports in the same period by 23.9 percent, the bank said.


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