Kazakhstan’s inflation-targeting gambit goes awry
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Central Asia

Kazakhstan’s inflation-targeting gambit goes awry

Illustration: Getty

The Kazakhstan central bank’s reliance on an oversimplified toolbox to combat rising inflation could threaten its economy in the longer run. Seeking out alternatives and reassessing monetary policy is now more urgent than ever.

Kazakhstan is in trouble. Runaway inflation is putting pressure on the central bank to tame rising costs – and quickly.

In 2015, the National Bank of Kazakhstan joined the Reserve Bank of New Zealand as an inflation-targeting pioneer. Most monetary authorities, from the US Federal Reserve and Bank of England to the Bank of Japan, have a dual mandate to curb price increases and maximize employment. But NBK’s job is to keep inflation to a 3% to 4% range, period.

Things are going awry, however, in Kazakhstan, as it feels the impact of sanctions against Russia over its invasion of Ukraine. A former part of the USSR, Kazakhstan had remained a key economic partner of Moscow since the early 1990s – until the attacks on Ukraine.

Inflation surged to a three-decade high of 19.6% in November 2022, from 18.8% in October. This forced many analysts to warn that Kazakhstan’s inflation numbers dwarf similar inflation challenges facing the US or Europe and must be addressed.

The success of this regime requires the inflation-targeting monetary authority to be highly credible to make their commitment come true, which seems to be failing in Kazakhstan in past years
Thuy Hang Duong, Crawford University

What is worrying is that the spike occurred despite NBK’s series of assertive interest rate hikes in 2022, beginning with an emergency hike of 325bp to 13.5%


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