Inflation Spike Raises Odds of Rate Hike — Experts

Rising inflation in Kazakhstan has increased the likelihood that the National Bank will raise the base rate at its next meeting, the Association of Financiers of Kazakhstan (AFK) reports, reports Orda.kz.

In its latest review, the AFK notes that monthly inflation accelerated to 1.1% in September, up from 1% in August, while annual inflation rose to 12.9% from 12.2%. The real base rate (adjusted for inflation) fell from 4.3% to 3.6%, making tenge assets less attractive and increasing the chances of monetary tightening.

AFK analysts also commented on the slight pullback in the dollar exchange rate on Wednesday, following a sharp rise earlier in the week.

In addition to rising oil prices, the tenge could have been supported by information about a significant increase in net foreign currency sales by the National Bank in October (approximately $1.5 billion versus $987 million in September). Conversely, pressure on the exchange rate was exerted by payments by Kazakh companies on import contracts and external debt servicing, the AFK noted.

According to analysts, the National Bank may decide to raise the base rate on October 10.

While the regulator previously said it did not plan to adjust the rate this year, in late August, it acknowledged that growing inflationary pressure could force a change.

Original Author: Nikita Drobny