National Bank of Kazakhstan Increases Base Rate Amid Economic Challenges

The National Bank of Kazakhstan has raised the base interest rate from 15.25% to 16.5% to address economic uncertainty, driven by tariffs, a VAT increase, and deregulation. Analyst Rassul Rysmambetov indicated that these factors, including changes in U.S. policies, are expected to impact inflation significantly.

The National Bank of Kazakhstan (NBK) has elevated the base rate by 1.25 percentage points, moving from 15.25% to 16.5%, in response to increasing economic uncertainty. This significant adjustment reflects concerns about rising tariffs, an impending VAT increase, and broader economic deregulation that may escalate inflation, as reported by Kazinform on March 7.

Analyst Rassul Rysmambetov characterized this adjustment as proactive. He highlighted three major influences: first, shifts in U.S. policies under the Trump administration, particularly concerning energy, are likely to affect Kazakhstan’s budget and inflation. Secondly, President Kassym-Jomart Tokayev’s decree last May aimed at economic liberalization signals an ongoing trend towards price and tariff deregulation. Lastly, the proposed VAT increase has heightened inflation expectations.

Rysmambetov remarked that the current global economic climate could have been more favorable without the provocative increases in tariffs and VAT-driven inflation expectations. He elucidated, “If there had not been such an active attack on oil and inflation expectations related to VAT, the situation could have been much more stable.”

He further stressed the unpredictability of the current global situation, stating, “No one could have foreseen what is happening in the world today.” Rysmambetov elaborated on how the escalating tariff war involving the U.S., Europe, Canada, Mexico, and China marks a significant global shift, impacting oil-producing nations like Kazakhstan profoundly, which necessitates potential adjustments to existing plans.

The National Bank of Kazakhstan’s recent base rate increase demonstrates a proactive approach to mitigate economic challenges. Independent analysts attribute this decision to U.S. policy shifts, domestic economic liberalization, and rising VAT expectations, all of which contribute to inflationary pressures. As global economic conditions evolve, Kazakhstan must adapt to ensure economic stability.

Original Source: astanatimes.com