▲ Up
05:35 24-01-2018
АКИpress CA-News Tazabek Turmush
Kazakhstan hold rates after inflation risks ‘strengthened’
Central Asia | analysis | 10:31, 16 August 2016 | 10051

AKIPRESS.COM - tenge2Kazakhstan’s central bank kept its key interest rate unchanged after an unexpected cut last month as a surge in prices kept inflation at its fastest since 2008, Bloomberg reported.

The base rate, set as the new benchmark after the central bank abandoned its currency peg a year ago, was kept at 13 percent, policy makers in Almaty said in a statement on Monday. Seven of eight economists surveyed by Bloomberg forecast no change, with one seeing a decrease to 12.5 percent.

“The inflationary risks induced by oil prices, the main terms-of-trade determinant for Kazakhstan, have strengthened,” the central bank said in the statement. “A further reduction of the base rate will be based on the dynamics of actual inflation, its deviation from the forecast and target parameters, on inflation expectations, as well as the currency preferences of the population and the market.”

While the Central Asian economy is at risk of its first contraction since 1998, the central bank is taking a pause after annual price growth jumped to 17.7 percent in July, more than double this year’s target. “Moderate” inflation expectations among households, an economic downswing and slower price growth among Kazakhstan’s major trading partners bode well for a drop in the cost index, according to central bank Governor Daniyar Akishev.

The central bank also said it maintained its rate corridor at plus or minus one percentage point. The overnight deposit and lending standing facility rates form a band around the new benchmark.

“We see the positive developments with inflation, market functioning and the de-dollarisation processes in Kazakhstan,” Oleg Kouzmin, economist for Russia and the Commonwealth of Independent States at Renaissance Capital in Moscow who predicted no rate change, said before the decision. “The central bank would follow a gradual easing path to cement the positive developments.”

After adopting a free-floating exchange rate in August 2015, the central bank lifted its new benchmark to as high as 17 percent this year to halt outflows before reducing it by a cumulative 4 percentage points in May and July.

While the tenge has recouped some of last year’s losses as oil prices rebounded, the appreciation has done little to curtail inflation. The world’s second-worst performer in 2015 with a loss of about 50 percent against the dollar, the Kazakh currency has appreciated almost 12 percent since its drop to a record in late January.

Although the rate cut to 13 percent decreased the cost of financing for lenders, it also opened the possibility for “a part of tenge resources to flow to the currency market,” Akishev said Aug. 4. Under these conditions, the exchange rate is set to stay at its current level unless oil prices drop below $35 a barrel and the Russian ruble depreciates to 70 against the dollar, he said.

“Inflation has stabilized and will continue falling in the coming months,” Dmitry Polevoy, chief economist for Russia and the Commonwealth of Independent States at ING Groep NV in Moscow who forecasts the benchmark will drop to 10 percent by year-end, said before the decision. “De-dollarization is underway with no significant risks to the tenge, in our view, even if oil prices fall further.”

18:03 Hugh Masekela, South African jazz trumpeter, dies17:58 Kazakhstan responds to Belarusian criticism of suggestion to move Ukraine peace talsk from Minks to Astana17:48 In Davos, PM Isakov meets with ICRC president17:44 Kyrgyz National Conservatory Professor suspended: Ministry of Culture17:42 Ministry of Labor explains why citizens of Kyrgyzstan can not get social benefits to newborn children from January 117:36 President Jeenbekov called on regional governors to be responsible in determining regions' needs17:25 Car production at Bishkek Free Economic Zone discussed with Chinese corporation17:18 Saudi Arabia to render financial aid to Kyrgyzstan for construction of 27 schools17:08 Doctors haven't yet informed whether Tekebayev needs to be examined outside colony17:02 Owner of Garazh 312 nightclub, host "Misha orgasm” and 2 barmen taken into custody for 2 months17:01 Heiti Mäemees named Ambassador of Estonia to Kyrgyzstan16:37 49 citizens burned in bus fire in Aktobe buried in Uzbekistan16:34 53 air companies operate in Kazakhstan16:33 Alaska quake prompts tsunami alert16:20 Kyrgyz National Conservatory Professor denies she is in sex tape16:18 Remand prison #1 in Bishkek not yet transferred due to lack of money – State Penitentiary Service16:02 Jeenbekov ratifies agreement with Uzbekistan on delegation of responsibilities for air traffic services15:59 Russian nationalist leader Vladimir Zhirinovsky proposes to lease Issyk-Kul lake in exchange for writting off Kyrgyzstan's debt15:49 Tekebayev's leg swollen, he needs medical aid, says Ata Meken party member15:44 State Penitentiary Service offers to ease extradition of foreign citizens
© AKIpress News Agency - 2001-2018. All rights reserved
Republication of any material is prohibited without a written agreement with AKIpress News Agency. Any citation must be accompanied by a hyperlink to akipress.com.
Our address:
Moskovskaya str. 189, Bishkek, the Kyrgyz Republic
e-mail: english@akipress.org, akipressenglish@gmail.com;
Tel/Fax: +996(312)65-03-06