Kazakhstan Central Bank Surprises with 100 Basis Point Interest Rate Hike

Forex - The National Bank of Kazakhstan (NBKZ) made a surprise decision to raise its policy interest rate by 100 basis points, highlighting inflation risks.

According to the announcement from NBKZ, the policy interest rate was increased from 14.25% to 15.25%, while market expectations had indicated that the rate would remain unchanged.

The statement noted that the decision was made considering updated forecasts and assessments regarding the balance of inflation risks.

In Kazakhstan, annual inflation rose to 8.5% in October. The Bank revised its inflation forecast for 2024 to 8-9%. The forecasts for 2025 and 2026 were updated to 6.5-8.5% and 5.5-7.5%, respectively.

The statement also indicated that, "The weakening of the exchange rate, the decrease in real interest rates due to rising inflation, and the increase in forecasts for the coming years have led to a softening of overall monetary and credit conditions. Given the increased volatility in financial markets, this situation necessitated a rise in the base interest rate. Given the fluctuations in the finance and energy markets, the Committee will closely monitor the need for additional tightening of monetary policy in the near term to ensure a more sustainable decline in inflation and to reach the 5% target."