Kazakhstan’s central bank cut its refinancing rate to a record after inflation eased for a second month, bringing price growth further below the regulator’s target range.
The National Bank of Kazakhstan reduced the benchmark rate by a half-point to 5.5 percent, effective Aug. 6, the Almaty-based regulator said in an e-mailed statement today. The biggest energy producer in central Asia last decreased borrowing costs in June.
“We had not expected the NBK’s easing to be so aggressive as inflation risks remain high in the country,” Julia Tsepliaeva, head of research at BNP Paribas SA in Moscow, wrote by e-mail. “The new cut may mean that the NBK tends to prioritize economic growth.”
Kazakhstan, which reduced its main rate for a fourth time this year, is following emerging economies from Brazil to India in lowering borrowing costs to ease credit flows and spur growth. While the government predicts the economy of the second-biggest oil producer in the former Soviet Union will gain 7 percent this year and maintain that pace of expansion until 2015, gross domestic product grew 5.6 percent in the first quarter from a year earlier.
Consumer-price growth last month decelerated to 4.7 percent on an annual basis, the slowest since March and down from 4.9 percent in June. The inflation rate may be closer to the lower level of the central bank’s target range of 6 percent to 8 percent by the end of this year, Chairman Grigori Marchenko said July 25, Profinance website reported.
The central bank has shaved 2 percentage points off its key interest rate since the start of the year as inflation stayed below its target range every month in 2012. That helped fuel credit expansion and cut the share of non-performing loans in the banking system to 30.9 percent in the second quarter, according to BNP Paribas.
Kazakhstan’s inflation will end the year at “no more than” 7 percent, Deputy Prime Minister Kairat Kelimbetov said May 24. That compares with 7.4 percent at the end of last year.