Let us remind you that as a result of the previous meeting of the monetary policy committee, the base rate was reduced from 16.00% to the current 15.75%.
The editorial office of The Tenge surveyed economists to familiarize themselves with the key arguments of the expert community on this issue. The opinions of those surveyed were almost unanimous, however, each of them focused on the aspects of the decision that they considered important.
The director of the TALAP Center for Applied Research, Askar Kysykov, believes that the National Bank will be extremely cautious regarding changes to the base rate.
Askar Kysykov, director of the TALAP Center for Applied Research
Currently, macroeconomic conditions indicate that the reduction of the base rate will continue. Inflation is below 10%, so with a base rate of 15.75%, the real rate is almost 6% - this is a very high value. Therefore, the National Bank will likely reduce the base rate, but not by much, probably by half a percent, because they are being cautious. They operate under the concept of inflation expectations, which remain high. However, overall, if we look at inflation, the base rate should be reduced at a faster pace. The base rate could be lowered to 12-13% to achieve a real rate of 3%, but I am confident that the National Bank will not go for this and will continue to reduce the interest rate gradually.
Leading analyst of the Association of Financiers of Kazakhstan, Zarina Skripchenko, also believes that the financial regulator will not make abrupt moves and will continue the gradual reduction of the base rate.
Zarina Skripchenko, leading analyst of the Association of Financiers of Kazakhstan
In our opinion, at the upcoming meeting on January 19, a further cautious reduction of the base rate is possible against the backdrop of dynamically slowing inflation in Kazakhstan (9.8% for 2023 compared to 20.3% a year earlier) and improving external inflationary conditions. In particular, we can note the decline in global food prices (the FAO index for 2023 fell to 124 points, which is 20 points below the average for 2022) and energy resources (the average price of oil in 2023 was $82.2 per barrel compared to $99 a year earlier), as well as the slowdown in price growth in Kazakhstan's trading partner countries (except for Russia).
According to the latest signal message from the National Bank, the reduction of the base rate will continue provided that the actual inflation dynamics correspond to its projected trajectory (7.5-9.5% in 2024) and the reduction of internal inflationary risks (fiscal stimulation, stable domestic demand, unstable inflation expectations of the population).
Economist Arman Beisembaev is also confident that the base rate will be reduced slightly, but he did not provide a definite forecast. After all, the monetary policy committee, thanks to macroeconomic indicators, has the opportunity for more significant changes.
Arman Beisembaev, economist
I see all the prerequisites for a reduction of the base rate by another 0.25. However, we cannot exclude the possibility of a more significant reduction of 0.5 or even 0.75. Inflation has become definite, developed countries are practically on the verge of starting a round of rate reductions. So the National Bank definitely has a lot of room for maneuver.
Experts Halyk Finance believe that the base rate needs to be reduced by 1%. The analysts expressed their opinion in a recent review.
Asan Kurmanbekov, expert at Halyk Finance
Current indicators suggest a continued trend of gradual stabilization of inflation in the economy, supported by the strengthening of the national currency, dedollarization, and moderate external price dynamics. At the same time, the cautious and relatively strict anti-inflation policy of the monetary regulator has contributed to such a stable disinflationary trajectory to some extent.
The inflation forecast for the end of the current year, announced by the National Bank during the last decision on the base rate, has not changed and remains at 7.5-9.5%, which on average corresponds to our forecast of 8.5%.
Inflationary pressure is gradually decreasing both in Kazakhstan and around the world. At the same time, the costs of geopolitical tension are not only not diminishing but are also spreading to new regions, which hinders the normalization of inflation. Fiscal policy in Kazakhstan still has a distinctly interventionist character, which, combined with the increase in utility tariffs, will delay the achievement of a more acceptable level of inflation.
In our opinion, at this moment it is very important for the country to implement a coordinated economic policy in the context of fiscal and monetary components. We cautiously hope that this year transfers from the National Fund will not be increased again in March, as was the case last year. Thus, the unexpected infusion into the budget from the National Fund of new funds amounting to T1.3 trillion at the end of last year significantly complicates the adjustment of the transmission mechanism of monetary policy and, in addition, will prolong the negative impact on inflation in the new year, hindering the process of slowing price growth.
Currently, there is an expanding gap between the base rate and inflation, which reaches 6 percentage points. At the same time, further slowing of inflation will halt the growth of the real rate.
A cautious reduction of the rate by the regulator will allow for a gradual normalization of market interest rates without destabilizing inflation expectations. In our opinion, at the next meeting of the National Bank's monetary policy committee, the base rate can be reduced by 50-100 basis points to 14.75-15.25%. In the future, a consistent easing of monetary policy (in the absence of additional financing of the economy of Kazakhstan from the National Fund) may bring its level in real terms to 3-4%, and the size of the base rate to 12.0% by the end of the current year.
Economist Zhanat Nurgaliyev is confident that the base rate will be reduced by only 25 basis points. However, the expert does not rule out that the National Bank may take a pause in the trajectory of reducing this indicator, at least at the first meeting of the monetary policy committee in 2024.
Zhanat Nurgaliyev, economist
After the meeting of the monetary policy committee in November of last year, the National Bank of Kazakhstan mentioned that they would consider the feasibility of a gradual reduction of the base rate, but taking into account the maintenance of moderately tight monetary conditions in the medium term to return inflation to the target of 5% and anchor inflation expectations. That is, it is clear that a reduction of even 1% cannot be expected. Moreover, the National Bank's statement also mentioned that pauses in changing the base rate are not excluded to accumulate data and monitor the balance of risks.
Let us remind you that the analytical center of the Association of Financiers of Kazakhstan conducted a similar survey. According to its results, 94% of respondents also expressed their confidence in the reduction of the base rate.