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The National Bank kept the base rate at 16.75%

The NBK explained this decision by its doubts about the sustainability and stability of the decreasing inflation trend and the pro-inflationary risks implementation. Were confirmed concerns about the instability of the improving inflation expectations, and they began to grow unfavourably again in March (16.5% vs. 14.2%). The core inflation indicator has slowed down but is still high, and it reflects the current inflationary environment.

At the same time, the National Bank confirmed its previous forward guidance to maintain the current base rate level during the first half of 2023 and promised to submit updated outlooks on key macroeconomic indicators in May.

P.S. The current decision and its prerequisites were expected (Base-rate expectations (04/07/2023) (jusan.kz) especially including the shift in the balance of risks towards their deterioration. At the same time, the likely deterioration of future inflation outlooks due to the materialization of accumulated imbalances in the housing and utility services and fuel markets (Infrastructure of Kazakhstan: modernization or repair (jusan.kz) creates space, if not for additional conditions tightening, then for prolongation of the term for maintaining the base rate at the current level, especially if there are no signs of deterioration in economic activity.

Aizhan Alibekova

Senior Analyst

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