BAKU, Azerbaijan, July 4. Devaluation trends in the Russian foreign exchange market may affect the market of Kazakhstan, Trend reports via the Analytical Credit Rating Agency (ACRA).
According to the agency, by mid-2022, the inflation target corridor has amounted to four-six percent per annum, which can hardly be called a representative indicator due to very low likelihood of consumer inflation reaching the above level given the current risks.
"The forecast for consumer inflation for the current year (on average for the year and at the end of the year) implies a range of 11-13 percent, and its rates, even with a subsequent reduction in the first half of 2023, may fluctuate between 10-99 percent,” the agency forecasted.
“Besides, there is a high potential for the transfer of devaluation trends from the Russian foreign exchange market to the market of Kazakhstan in the coming years, given the degree of integration of the two economies, as well as the small scale of the foreign exchange market of Kazakhstan and its openness," the agency noted.
Thus, increase of inflation and risks of currency shocks at the current level of the inflation target corridor set by the macro regulator create conditions for maintaining a relatively high base rate at a moderate long-term neutral rate and allow Kazakhstan's monetary policy to be assessed as tight, the agency explained.
Assuming that the trends described above continue, the authorities will continue to stop them by increasing monetary rigidity, added the agency.