Kazakh Central Bank Says It Won’t Raise Benchmark This Quarter

Feb. 8 (Bloomberg) -- Kazakhstan’s central bank, which put its easing cycle on hold five months ago, said it probably won’t raise the benchmark interest rate this quarter because it expects inflation in central Asia’s biggest oil producer to slow.

Consumer price growth will ease to less than 7 percent by the end of next month, the Almaty-based bank said today in an e- mailed response to questions.

Kazakhstan has left its refinancing rate at 7 percent since September and policy makers are trying to time a reversal of last year’s easing cycle to avoid hampering a recovery. While inflation picked up last month, the debt-ridden financial industry remains weak. The government has invested $19 billion to support its banks and economy since the end of 2007 after credit markets froze and a local property bubble burst.

The central bank won’t raise rates on the back of one-time jumps in the inflation rate, it said. Consumer price growth accelerated to an annual 7.3 percent in January from 6.2 percent the previous month, though that leap was triggered by one-time items, including higher utility prices and seasonal factors, the bank said. Monthly inflation accelerated to 1.4 percent in January, after rising 0.6 percent in December.

If inflation doesn’t slow by March, the central bank may increase the refinancing rate at the end of this quarter, the bank said.

The central bank signaled on Dec. 14 it was finished cutting rates after Kazakhstan entered a customs union with Russia and Belarus that led to higher import prices. That’s ended a slowdown in inflation that had lasted since April last year.

Import Duties

The customs union came into effect on Jan. 1 to support trade between the three former Soviet republics. Kazakhstan’s import duties have averaged 10.6 percent this year, compared with an average of 6.2 percent in 2009, Novosti-Kazakhstan said on Jan. 15, citing Trade Minister Aset Isekeshev.

The economy of Kazakhstan, which holds 3.2 percent of world oil reserves, expanded 1.1 percent last year, after growing 3.2 percent the year before, the government’s official newspaper, Kazakhstanskaya Pravda, said on Jan. 26, citing Prime Minister Karim Masimov. The economy is expected to grow between 1.5 percent and 2 percent this year, according to the government.

To contact the reporter on this story: Nariman Gizitdinov in Almaty at ngizitdinov@bloomberg.net