The National Bank raises the key rate by 150 bps

KAZAKHSTAN - In Brief 26 Oct 2022 by Alexander Kudrin

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The National Bank announced that it raised the key rate to 16%, i.e., by 150 bps. Last time the regulator raised the key rate at the end of July, while in early September, it kept it unchanged. The interest rate corridor remained unchanged, implying that the regulator will apply a 17% charge to supply the liquidity and 15% to absorb it. Inflation in Kazakhstan reached 17.7% y-o-y, having accelerated to 1.8% m-o-m in September. It looks as though inflation y-o-y will go up further this month because, in October 2021, it was at 0.7% m-o-m. In October 2022, it will exceed 1.5% m-o-m. It may even approach 2.0%, as the Bureau of National Statistics persistently reports that the w-o-w inflation in the segment of socially essential goods remains elevated (0.2% w-o-w). The National Bank of Kazakhstan mentioned that inflation expectations remain high. A massive fiscal stimulus is just one of the inflationary factors discussed in the notes of this series previously. Other factors, such as a strong ruble and rising global inflation, cause a strong pass-through effect. Meanwhile, the regulator estimated the country’s GDP grew in 9M22 by 2.8% y-o-y, which was generally in line with our expectations. The National Bank mentioned that the slowdown of economic growth largely stemmed from weak growth in the mining sector, while manufacturing and other sectors of the economy performed relatively well. As in 4Q22, the oil sector will likely resume production at nearly full capacity then one can count on some acceleration of economic growth at the end of this year. As inflation will remain high in 4Q22, the Committee on monetary policy of the National Bank of Kazakhstan will probably hike ...