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National Bank slashes key rate

14 february 2012, 12:25
Gregory Marchenko. Photo by Vladimir Dmitriyev©
Gregory Marchenko. Photo by Vladimir Dmitriyev©
Kazakhstan’s National Bank has slashed its key rate from 7.5% to 7%, the Bank’s Press Service reports.

“Given the trends at the financial markets and the slowing inflation rate, the National Bank issued a decree February 14 to set the key rate at 7%, record low level”, the statement reads.

The previous change of the key rate happened March 9, 2011 when the rate was raised from 7% to 7.5%.
As of the end of 2011, the annual inflation rate in Kazakhstan made up 7.4%.

At a press-conference February 14 the National Bank’s Governor Gregory Marchenko pointed out that in April the key rate could be slashed even further if the inflation rate remains at the current level.

According to him, the annual inflation as of February 1, 2012 stood at 5.9%.

The key rate is the interest rate at which an eligible financial institution may borrow funds directly from the National (Central Bank). The National Bank uses the key rate to control the supply of available funds, which in turn influences inflation and overall interest rates. The more money available, the more likely inflation will occur. Raising the rate makes it more expensive to borrow from the National Bank. That lowers the supply of available money, which increases the short-term interest rates. Lowering the rate has the opposite effect, bringing short-term interest rates down.

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