Kazakhstan National Bank likely to maintain base rate at 14.25% amid inflation and economic challengesKazakhstan's National Bank is expected to keep its base rate unchanged at 14.25% when it announces its decision on November 29, 2024, according to analysts surveyed by Interfax-Kazakhstan. Given the ongoing inflationary pressures and exchange rate fluctuations, most experts believe the central bank will adopt a cautious approach and maintain the rate at its current level.Inflation and Exchange Rate PressuresAccording to the Association of Financiers of Kazakhstan (AFK), the National Bank is likely to keep its base rate at 14.25%. This forecast is based on the bank’s recent statement following its October meeting."The National Bank’s statement indicated that the balance of external and internal risks has shifted towards inflationary pressures. The regulator also noted that a rate cut in November could be possible if inflation steadily declines and fiscal stimulus is reduced," experts reminded.Data from AFK shows that inflation in Kazakhstan accelerated in October, rising by 0.9% month-on-month (compared to 0.4% in September) and by 8.5% year-on-year (up from 8.3% in September). Additionally, the national currency weakened further in November, with the USD/KZT exchange rate reaching 499.55 tenge per dollar on November 28, compared to 488.23 tenge at the end of October (a 2.1% increase, or 10.35 tenge)."Given these factors, it is unlikely that the National Bank will lower the base rate at the upcoming meeting on November 29. Maintaining the rate at its current level is essential for ensuring both price stability and the stability of the national currency. In line with this, 75% of financial market experts surveyed by AFK believe the most probable outcome of the upcoming meeting is that the base rate will remain at 14.25%," AFK told Interfax-Kazakhstan.No Conditions for Rate ReductionOlga Belenskaya, head of macroeconomic analysis at Finam Group, argues that the National Bank will likely keep the rate unchanged because the conditions for a rate cut are not yet in place. "For a cautious and balanced reduction of the base rate, the regulator would need to see a stable decrease in core inflation, along with an effective and systemic solution to the fiscal gap," she said."However, as we can observe, these conditions have not been met," Belenskaya added. "There has been no stable decrease in core inflation, and the budget situation remains tense." She pointed to a government bill that was recently introduced to Kazakhstan’s parliament, which includes a revised forecast for state revenues in 2024. The updated forecast is 2 trillion tenge lower than the previous plan, and this shortfall is expected to be covered through additional transfers from the National Fund. "This increase in transfers is a pro-inflationary decision," Belenskaya concluded.Moreover, Kazakhstan's government plans to cover the budget deficit through borrowing, which could further increase inflationary pressures. "Given the current situation, although it’s possible the National Bank may wish to close the year with a base rate of exactly 14%, it is more likely that the rate will remain unchanged at 14.25%," Belenskaya predicted. (ICE ALMATY)

Fonte notizia: INTERFAX