Kazakhstan's central bank raised its key refinancing rate by 50 basis points on Wednesday, the first revision of the rate in 18 months, in a move designed to stem accelerating inflation in Central Asia's largest economy, Reuters reported.
As the central bank raised its refinancing rate to 7.5 percent with immediate effect, Governor Grigory Marchenko said the bank would consider raising its full-year inflation forecast from the current range of between 6 percent and 8 percent.
"It makes no sense to lower our inflation forecast given the situation on food markets. It could be revised, and not in a downward direction," Marchenko told reporters. He said the central bank would make a decision after the end of this month.
Oil-rich Kazakhstan raised its refinancing rate, which had been stable since September 2009, less than two weeks after the central bank of major trading partner Russia surprised markets by raising all of its key interest rates.
The Russian rouble pushed to 26-month highs against the dollar after the central bank also widened its trading band to deter speculators and allow more room for currency appreciation to help fight inflation.
The Kazakh tenge, like the rouble, is boosted by high world oil prices and is trading at its strongest since February 2009, when the currency was devalued. The central bank abandoned a trading corridor and moved to a managed float from Feb. 28.
Marchenko said the central bank had purchased around $1 billion in the foreign exchange market since the beginning of March to curb appreciation of the tenge, in addition to the $4.5 billion bought in the first two months of the year.
"This trend will continue," he said.
The weighted average of the tenge was 145.70 per dollar on the Kazakhstan Stock Exchange, or 1.1 percent stronger than it finished last year.
"It's premature to say that the tenge will appreciate by 5 percent or 6 percent," Marchenko said. "As we have said before, we will not allow the sharp appreciation of the tenge."
Inflation in Kazakhstan slowed to 1.5 percent month-on-month in February from 1.7 percent in January, official data shows. Consumer prices grew 3.2 percent cumulatively in the first two months of 2011, versus 2.3 percent in the same year-ago period.
Full-year inflation in 2010 was 7.8 percent.
The central bank also said Kazakhstan's net gold and foreign currency reserves rose to $32.9 billion as of Feb. 28 from $30.6 billion on Jan. 31.