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Kazakhstan's National Bank has announced its intention to maintain the current monetary policy stance, including the base interest rate, until the end of the first half of 2026. This strategic move is designed to curb inflation and ensure price stability.

Key Factors Influencing Monetary Policy

The central bank highlighted several key factors influencing its decision. These include persistent internal inflationary pressures, the potential impact of quasi-fiscal stimulus, and rising costs for utilities and fuel. Uncertainty surrounding the implementation of tax reforms, particularly an increase in the VAT rate and broader tax base, also contributes to the complex economic landscape.

Observing how businesses adapt to these changes in the coming quarters will be crucial. To mitigate the pressure these factors exert on the economy, the regulator plans to hold the base interest rate at its current level throughout the first half of 2026.

Inflation Outlook and Targets

The National Bank's projections indicate that inflation is expected to be between 9.5% and 12.5% in 2026, with a subsequent decrease to 5.5%-7.5% by 2027. The primary objective of the regulator is to steer inflation towards the medium-term target of 5% on a sustainable basis.

According to the National Bank's data, significant influences on inflation include the reform of housing and communal services tariffs, the liberalization of fuel prices, extensive quasi-fiscal stimulus, tax and budget changes, and the expectations of economic agents. While these factors generate inflationary pressures that cannot be fully neutralized by interest rates alone, the base rate plays a vital role in curbing "second-round effects."

Strengthening Economic Stability

In collaboration with the government, the National Bank is also developing the domestic market for government securities, the yield curve, and the public debt management framework. Measures include enhanced oversight of budget expenditures and investment projects, alongside the implementation of digital solutions for fiscal and financial monitoring. These initiatives aim to reduce non-monetary inflation risks, bolster confidence in economic policy, and create conditions for a sustained decline in inflation without excessive pressure on the economy.

Responding to Inflationary Risks

Officials at the National Bank stated that decisions regarding the base interest rate are made based on an assessment of the balance between internal and external risks. "This does not mean an automatic increase in the base rate, but rather readiness to act in a timely manner if the balance of risks shifts towards inflation," the press service noted.

During the January decision on the base rate, the intention to maintain the current monetary policy stringency through the first half of the year was communicated to solidify the slowdown in inflation. If this proves insufficient, "the possibility of additional tightening is being considered."

The National Bank concluded, "In conditions of internal economic risks and external uncertainty, the central bank's main role is not to predict every individual shock, but to ensure the economy's resilience to such changes. For this, monetary policy must be flexible, predictable, and aimed at achieving the inflation target."

The Monetary Policy Committee of the National Bank noted that it may consider adjustments if inflation deviates from a stable downward trajectory.