ALMATY/Oct. 16 (The Conway Bulletin) – Kazakhstan’s Central Bank raised its key interest rate for the first time in 2-1/2 years because of the rising threat of inflation, highlighting growing concern in the region that price rises may wipe out tentative economic gains made since a 2014-17 downturn.

Announcing the rate rise to 9.25% from 9%, Kazakh Central Bank chief Daniyer Akishev said inflation was currently sitting at 6.1%, square in the middle of the government’s 5-7% target for the year, but that pressure was building.

“Today’s decision, in our opinion, will reduce the severity of the problem,” he said. “The new level of base rates will increase the demand for tenge assets and bring monetary and credit conditions to a level close to neutral.”

Kazakhstan is the biggest economy in Central Asia and had looked to have made a reasonable recovery from a sharp economic downturn between 2014 and 2017 that was triggered by a collapse in oil prices and a recession in Russia. Over the last few months, though, the Kazakh tenge has come under pressure, dropping to its lowest level since the start of 2016. Analysts said global insecurity and concern over Emerging Markets have hit the tenge.

The Kazakh Central Bank last increased its core interest rate in February 2016 when it raised it by 1 percentage point to 17%. From then it slashed interest rates to 9% to stimulate growth.

ENDS

>>This story was first published in issue 388 of The Conway Bulletin on Oct. 17 2018