In a move aimed at bolstering economic activity and making borrowing more accessible, the National Bank of Kazakhstan announced on February 23 a reduction in the base rate from 15.25% to 14.75%. This decision marks the fourth consecutive cut in the base rate since August 2023.
The reduction of the base rate, the interest rate at which the central bank lends to commercial banks, is anticipated to stimulate lending to both households and businesses. The move comes amidst a backdrop of cautious optimism regarding the country's economic outlook.
As per a survey conducted by the Association of Financiers of Kazakhstan, 67% of experts predicted a reduction of 25 basis points (bps) to 15%, while the remaining 33% anticipated a larger cut of 50 bps to 14.75%. Halyk Finance analysts had even more ambitious projections, suggesting a potential decrease of 50 to 100 bps, citing pro-inflationary factors such as rising utility prices, increased minimum wage, and moderate currency depreciation.
Jusan Invest, however, had a more conservative outlook, advocating for maintaining the base rate at its current level. Nevertheless, the National Bank's latest macroeconomic survey projects a further reduction to 13.8% by the end of 2024, with median forecasts for 2025 and 2026 at 10.5% and 9%, respectively.
The recent move by the National Bank follows a series of gradual reductions since August 2023 when the base rate stood at 16.75%. Since then, the bank has steadily decreased the rate in an effort to stimulate economic growth.
In the region, neighboring Uzbekistan's Central Bank maintained its main interest rate at 14%, highlighting its commitment to curbing inflation, while Kyrgyzstan's National Bank decided to hold its discount rate at 13%, aiming to stabilize inflation within the target range of 5-7%. Tajikistan, on the other hand, maintained its key rate at 13.46%, in line with its efforts to manage inflationary pressures and support economic stability. No data could be found regarding Turkmenistan's recent monetary policy decisions or actions by its central bank during this period. Afghanistan's current base rate is reported to be 14.94%, reflecting the monetary policy stance taken by its central bank amidst the country's economic landscape.
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