IMF: Kazakhstan’s central bank may need to tighten monetary policy further

NUR-SULTAN. KAZINFORM «As inflation soars around the world, central banks are racing to tighten monetary policy to deliver on their mandates of maintaining price stability,» according to Nicolas Blancher, a Division Chief in the IMF's Middle East and Central Asia Department, the IMF informs on its website.

«In Kazakhstan, raising interest rates has proved essential to avoid a spiral of inflation, currency depreciation, and dollarization. Indeed, the National Bank of Kazakhstan may need to tighten monetary policy further to bring inflation back to target and anchor inflation expectations—even though that could weaken immediate economic growth,» Nicolas Blancher noted in the IMF’s recent Article IV report.

In his opinion, price stability is a condition for macroeconomic stability and sustainable economic growth. It also preserves standards of living.

Nicolas Blancher adds that Kazakhstan has had a positive experience of transitioning to inflation targeting.

In this regime, the central bank is mandated to maintain a certain level of price increases, rather than target growth, the money supply, or the exchange rate. The NBK’s increased focus on domestic price stability and reliance on exchange rate flexibility has helped anchor inflation expectations and absorb external shocks since 2015.

Meanwhile, Nicolas Blancher says, the transition remains incomplete. «More progress is necessary, including diversifying the economy, reducing dollarization, and limiting exposure to external shocks. The long-term benefits are substantial, and the NBK’s Monetary Policy Strategy 2030 lays out comprehensive reforms to address many of these challenges,» he concludes.