WASHINGTON: Kazakhstan’s central bank unexpectedly cut its key interest rate for the second time since introducing it last year, saying the risks of inflation accelerating further are “minimal” after it soared for 10 months to the fastest since 2008. The base rate, set as the new benchmark after the central bank abandoned its currency peg in August, was decreased to 13 percent from 15 percent, policy makers in Almaty said in a statement on Monday. Four of five economists surveyed by Bloomberg forecast no change, with one seeing a decrease to 14 percent.
While inflation remains at more than double this year’s target, the improving outlook for prices means the central bank can shift its focus to the economy, which is at risk of its first contraction since 1998. Even as annual price growth in June jumped to 17.3 percent, Deputy Governor Oleg Smolyakov said last month that policy makers saw “more and more” factors in favor of deeper easing after an unexpected two percentage-point decrease in May.
“There’s a high probability that inflation can be expected to reach the upper bound of the 6 percent-8 percent target corridor by end-2016,” the central bank said. “A possible reduction of the base rate will be determined by the presence of a sustained signal indicating that inflation is converging with the target range.”
