Rasul Rysmambetov, a financial consultant, believes that the regulator faced an important choice: to keep the base rate at the current level or raise it. In the context of economic uncertainty related to Trump's inauguration, possible tariff increases and inflation risks, the expert believes that the most optimal step would be to increase the rate by 0.25%.
— I think that the National Bank is trying to stay within the inflation range this year, trying to predict possible economic events, including reforms and an increase in utility tariffs, which already occurred in January. Therefore, all this needs to be contained," Rysmambetov stressed.
Inflation
Photo: Kazinform/ Freepik
He also discussed the impact of tariff increases on inflation and the economy as a whole. If the increase in tariffs, such as for heat and electricity, is moderate, this may help to increase investment attractiveness, creating incentives for the construction of new facilities, such as thermal power plants or refineries, if energy prices are closer to market prices. However, in his opinion, it is necessary to find the right balance so as not to harm the population.
"The National Bank has taken a neutral position in this case, but further decisions will depend on how events develop," he concluded, adding that clarity can be expected at the next meeting of the monetary commission.
Economist Askar Kysykov said that the base rate, despite its role in combating inflation, does not always turn out to be an effective tool. According to him, since the transition to the inflation targeting regime in 2015, the main mandate of the National Bank has been price stability. However, in practice, the base rate does not always keep inflation in check.
— Over the years, we have seen that, in fact, the base rate does not help to contain inflation. There were times when the rate was high, but inflation remained at a high level. Therefore, the impact of the base rate on inflation is limited. Firstly, the interest rate channel does not work effectively, since a significant proportion of loans are consumer loans that do not respond well to rate changes. For example, banks issue loans at 30-50%, and such loans are not elastic to changes in the base rate," says the economist.
credit
Photo: Kazinform
He also stressed that in the current conditions, the base rate has an impact mainly on the deposit base. The high rate encourages citizens to leave money on deposits, which improves the liquidity of second-tier banks. These banks, in turn, deposit their funds in the National Bank, earning high incomes. Thus, the base rate becomes a tool that helps the financial sector maintain liquidity and not engage in foreign exchange transactions, thereby preventing the tenge exchange rate from fluctuating.
"Our base rate has become a tool not to fight inflation, but more to maintain the exchange rate," Askar Kysikov believes.
The expert noted that inflation in Kazakhstan last year amounted to 8.6%, while the main contribution to the price increase was made by services, primarily tariffs. Tariffs for water, electricity and heating increased by 20-30%, which became the main factor of inflation.
Astana to reduce electricity tariffs for businesses
Photo: CREAM of the Ministry of National Economy of the Republic of Kazakhstan
— The base rate does not affect the tariffs in any way. This year, we expect another increase in tariffs, as well as an increase in fuel prices. Despite any values of the base rate, inflation will rise," Askar Kysykov emphasized.
The speaker suggested that in March the National Bank may decide to raise the base rate.
Author: Еламан Турысбеков
Source: https://www.inform.kz/ru/sderzhivaetli-bazovaya-stavka-inflyatsiyu-vkazahstane-mnenie-ekspertov-0aac3e