As we expected, today the National Bank of the Republic of Kazakhstan has raised its base rate by 0.5 p.p. to 14.5% per annum level.
Given the long-term nature of the inflation pressure, the current base rate increase will promote pro-inflationary factors reduction. The increased rate will restrain unproductive lending growth, that puts pressure on the tenge exchange rate and consumer inflation. Moreover, the rate increase will have a positive impact on savings terms and provide additional support to the national currency.
At the same time, despite the continuing significant inflationary threats, the real rate (base minus inflation) is zero again, and this corresponds to the previously announced policy on the prevention of a negative rate of the National Bank of the Republic of Kazakhstan.
In a press release on the base rate, the National Bank said that it expected annual inflation to accelerate above 15% in 2022, which indicates a likely increase in inflationary pressure. As a result, the future real rate is probably to be negative. This will lead to a further increase in the base rate.