National Bank of Kazakhstan Raises Base Rate to 16.5%: Reasons, Consequences, and Forecasts, DKnews.kz reports.
The National Bank of Kazakhstan (NBK) has announced an increase in the base rate to 16.5% per annum, with a corridor of +/- 1 percentage point. This decision was made in response to accelerating inflation, excessive consumer lending growth, and rising inflation expectations among the population.
The primary goal is to control inflation, stabilize prices, and strengthen confidence in the national currency. In this article, we will analyze in detail the reasons behind this decision, its impact on Kazakhstan’s economy and population, and the economic outlook for the coming years.
Why Did the National Bank Raise the Base Rate?
The main reason is the rapid increase in price growth rates and overly loose monetary conditions. Several key factors influenced this decision.
Inflation is Accelerating
Inflation levels in Kazakhstan have been rising significantly in recent months:
🔹 Annual inflation reached 9.4% in February.
🔹 Monthly inflation exceeded historical averages.
🔹 The sharp rise in service prices is the primary driver of inflation.
🔹 Core inflation (excluding temporary factors) accelerated to 14.2% (annualized) in February.
Without stricter monetary policy, inflation could spiral out of control, leading to economic instability.
Rapid Growth of Consumer Lending and Risk of Overheating
Consumer lending in Kazakhstan grew by 33.5% in 2024.
An excessive rise in borrowing increases internal demand, pushing prices even higher. If this trend continues, the financial market may overheat, and many borrowers may struggle with debt repayment.
Rising Inflation Expectations Among the Population
Public expectations of future inflation also influenced the decision. In February, inflation expectations reached 13.7%, leading people to make purchases in advance, thereby increasing money circulation and fueling inflation.
This creates an inflationary spiral: fear of rising prices boosts demand, which in turn drives prices up. The National Bank raised the base rate to curb this cycle.
External Factors: Inflation in Russia and Global Price Growth
Kazakhstan’s economy is closely tied to global trends and the economic situation in neighboring countries. The main external risks include:
🔺 Rising inflation in Russia – leading to higher import prices in Kazakhstan.
🔺 High global food prices – despite a slight decrease since December 2024, they remain elevated.
🔺 Tighter monetary policies by central banks worldwide – many countries are increasing interest rates to combat inflation, which also impacts Kazakhstan.
How Will the Increase in the Base Rate Affect the Economy?
This decision will directly impact loans, deposits, the tenge exchange rate, and economic growth.
Loans Will Become More Expensive
Banks will have to raise interest rates on loans, making borrowing more difficult for both individuals and businesses.
📌 Expected changes:
✔️ Higher mortgage and consumer loan rates.
✔️ Reduced loan issuance, lowering demand.
In the short term, this may slow economic activity, but in the long run, it will help curb inflation.
Tenge Deposits Will Become More Attractive
A higher base rate allows banks to offer better returns on deposits, encouraging people to save in tenge.
📌 Benefits for depositors:
✔️ Higher returns on tenge savings.
✔️ Reduced demand for foreign currencies, supporting tenge stability.
Impact on the Tenge Exchange Rate
Typically, an increase in the base rate strengthens the national currency, as both domestic and foreign investors find tenge assets more attractive.
However, the exchange rate is also influenced by other factors such as oil prices, global financial markets, and geopolitical risks.
Economic Growth Will Slow Down
The National Bank revised its forecast for Kazakhstan’s economic growth.
📉 GDP growth forecast:
🔹 2025-2026 – growth is expected to be in the range of 4.2-5.2%.
🔹 2027 – economic growth will stabilize at up to 4.5%.
Key reasons:
❌ Decline in oil production.
❌ Increase in VAT and utility sector reforms.
❌ Tighter monetary policy.
However, if the government successfully attracts foreign investment, liberalizes the economy, and implements structural reforms, growth could exceed expectations.
When Will Inflation Begin to Decrease?
The National Bank predicts a gradual reduction in inflation.
📌 Inflation forecasts:
✔️ 2025 – 10-12%
✔️ 2026 – 9-11%
✔️ 2027 – 5.5-7.5%
Main contributing factors:
✅ Reduction of fiscal stimulus and tax reforms.
✅ Regulation of fuel and utility prices.
✅ Slower growth in consumer lending.
Will the Base Rate Continue to Increase?
The National Bank will closely monitor inflation trends and adjust the rate accordingly.
📌 Key upcoming dates:
🔹 March 17, 2025 – release of the full monetary policy report.
🔹 April 11, 2025 – the next decision on the base rate will be announced.
If inflation remains high, further increases in the base rate are possible. However, if inflation starts to slow down, the rate could remain unchanged or even decrease.
Raising the base rate to 16.5% is a necessary measure to combat inflation. For the population, this means higher loan costs but better returns on deposits. For the economy, it represents a short-term slowdown but long-term stability.
