Kazakhstan's National Bank Hikes Base Rate to 18% Amid Inflation Surge
The National Bank of Kazakhstan (NBK) has announced a base rate hike, from 16.5% to 18%, citing accelerating annual inflation as the primary reason. This decision, made in October, will impact both businesses and households in the country.
The NBK's move comes as annual inflation surged to 12.9% in September. This increase, the highest in over a decade, is attributed to various factors including higher utility tariffs, extensive use of National Fund reserves, depreciation of the tenge, and persistent inflation expectations.
The higher base rate makes borrowing more expensive, discouraging lending and spending while encouraging savings. Banks are expected to adjust their lending and deposit rates in response, affecting their profitability and credit volumes. Businesses, in the short term, will bear the brunt of these high interest rates, with costlier borrowing potentially dampening investment and expansion. The high base rate is also likely to slow economic growth, making loans more expensive and slowing construction and banking activity.
The NBK's next decision on the base rate is scheduled for November 28. While borrowers, particularly businesses, face increased costs, savers stand to benefit from higher deposit rates. The ultimate impact on the economy remains to be seen, but the NBK's action reflects its commitment to controlling inflation.
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