Kazakh Central Bank Holds Key Rate but Warns of Inflation Risks

(Bloomberg) --

The National Bank of Kazakhstan kept interest rates on hold at a second consecutive meeting, but warned that inflation may pick up in the first quarter of next year.

The base rate stayed unchanged at 9.25% on Monday, the National Bank of Kazakhstan said in a statement on Monday. The decision was forecast by six economists polled by Bloomberg.

Inflation may accelerate to the higher edge of the central bank’s target corridor in the first quarter of 2020 due to increased tariffs on services and rising food prices, the central bank said.

Kazakhstan has held rates steady since a surprise hike in September helped tame a jump in food prices caused by increased social spending. Inflationary risks still remain though, and “further action” may be needed, the International Monetary Fund said in a report last month.

The central bank’s rates corridor, formed from the overnight deposit and lending rates, was kept at plus or minus one percentage point around the benchmark. The next rate decision will be announced on Feb. 3, according to the statement.

Key Insights:

• Inflation slowed to 5.4% in November from 5.5% in October. The central bank targets price growth in a corridor of 4%-6% and sees it at 5.5%-5.7% at the end of this year. Inflation could slow to 5%-5.5% by the end of 2020, according to the statement.
• The central bank sees economic growth at 4.2% this year and 3.8% in 2020.
• The current-account deficit is expected to reach 2.2% of gross-domestic product this year, and 3.1% next year, central bank Governor Yerbolat Dossayev told reporters on Monday.
• Kazakhstan plans to sell a tenge bond equivalent to $1.5b next year, big enough to qualify for JPMorgan’s local-currency debt index

To contact the reporter on this story: Nariman Gizitdinov in Almaty at ngizitdinov@bloomberg.net

To contact the editors responsible for this story: Torrey Clark at tclark8@bloomberg.net, Natasha Doff

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