Central Bank tightens its stance in November

Central Bank delivers surprise 100 basis point hike: At its last meeting of 2024 on 29 November, the National Bank of Kazakhstan (NBK) decided to raise the base rate by 100 basis points to 15.25% and keep the interest-rate corridor at plus or minus 1.0 percentage point. The hike was the first since 2022 and came on the heels of two consecutive holds and a cumulative 2.5 percentage points worth of rate reductions since August 2023. The decision surprised markets, which had anticipated the NBK standing pat.

Sticky price pressures and rising inflationary risks motivate move: The Bank determined that a tighter monetary policy stance was required to drive inflation toward its 5.0% medium-term target. Inflation has proven sticky so far in H2 2024, remaining entrenched above the target through October—where the Bank expects it to stay until at least 2027; the Bank hiked its end-2025 inflation forecast by 1.0 percentage points to 6.5–8.5%. The NBK noted rising pro-inflationary risks stemming from strong domestic demand, increasing utility tariffs and ongoing fiscal stimulus due to budget revenue shortfalls. Sharp weakness in the tenge will also drive up imported price pressures. Meanwhile, regarding economic activity, the Bank lowered its 2025 GDP growth projection by 0.5 percentage points to 4.5–5.5%.

NBK hints at further monetary policy tightening: In its communiqué, the NBK struck a hawkish tone, indicating that it “will closely monitor the necessity of additional tightening of monetary policy” to anchor the downward trend of inflation towards its target. The Bank admitted that upside inflationary risks had intensified since it had last convened, stemming from a depreciating currency, increased inflation expectations and fiscal stimulus. Given the unexpected hike, our panelists are currently in the process of updating their forecasts. The Bank will announce its next monetary policy decision on 17 January.

Panelist insight: Goldman Sachs’ Basak Edizgil and Clemens Grafe commented: “We think the hike was a one-off response to the recent FX weakness. However, the recent budget amendments (which significantly raised transfers from the national oil fund for both 2024 and 2025) also increase medium-term demand-driven inflation risks. Hence, the risk to our forecast of -100bp cuts in 2025 is to the upside from a further acceleration in domestic and external inflationary pressures.”

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