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Kazakhstan's National Bank is not ruling out the possibility of lowering its base interest rate in the near future، signaling a potential shift in monetary policy. The decision hinges on the sustained stability of key economic indicators.

Conditions for Rate Reduction

Governor Timur Suleimenov outlined the specific conditions under which a rate cut could occur. These include the persistence of disinflationary pressures، the continuation of a tight fiscal policy، and a moderating influence on utility and fuel prices. Additionally، a further decrease in demand and the absence of external shocks are crucial factors.

"We have indicated very clearly: if disinflationary effects persist، a strict fiscal policy is pursued، and there is a restraining influence in reforming tariffs and fuel prices، with further decline in demand and no external shocks – we believe there will be an opportunity to lower the base rate،" Suleimenov stated during a National Bank briefing.

Focus on Inflation Control

The National Bank chief emphasized that the primary goal is to bring inflation down to a stable level. "Our forecast is such، and we intend to wait for it: when inflation decreases and stabilizes، we will begin the cycle of lowering the rate،" he added.

Suleimenov also clarified that maintaining a high interest rate is not an end in itself. "Essentially، we do not intend to keep the rate at a high level. Our main desire is to reduce inflation through all available tools، including the base rate،" he explained.

Current Base Rate Decision

On April 24، the National Bank of Kazakhstan decided to maintain the base rate at its previous level of 18% per annum، with a corridor of +/- 1 percentage point.

Understanding the Base Rate

The base rate is the National Bank's primary tool for monetary policy. It determines the cost of borrowing for commercial banks and، consequently، influences the interest rates offered to the public and businesses for loans and deposits. The National Bank estimates that changes to the base rate impact inflation with a lag of approximately 12-18 months، with a weaker effect in the short term.

Previously، the National Bank had shared its plans regarding the base rate، indicating a intention to maintain current monetary conditions، including the base rate، until the end of the first half of 2026.

How the Base Rate Works

Changes in the base rate affect inflation through money market interest rates and the exchange rate. When the base rate increases، money in the economy becomes more expensive، leading to higher interest on loans. This encourages businesses and individuals to spend less and save more، slowing down price growth and curbing inflation.

Impact on the Tenge

A decrease in the base rate by the National Bank makes money cheaper. In the short term، this typically leads to a weakening of the tenge، as market participants anticipate a depreciation and may act against the national currency. In the longer term، however، a lower interest rate that successfully curbs inflation could potentially strengthen the tenge.

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