The base rate is a key monetary policy instrument of the National Bank.   By setting the level of the base rate, the National Bank determines a target value of the targeted interbank short-term money market rate in order to achieve the goal of ensuring price stability in the medium term.

The operational benchmark characterizing the target value of the interbank short-term rate is the TONIA indicator – weighted average interest rate on overnight repo opening transactions made on the Kazakhstan Stock Exchange in the automatic repo sector – represents a target interbank short-term interest rate of the money market.

The change in the base rate affects the inflation rate via interest rates in the money market and the exchange rate. For example, the increase in the base rate leads to the growth in interest rates of the money market, followed by the increase in the cost of funds in the financial market; this, in turn, affects the decision-making about consumption and saving by the population and enterprises. The reduced consumption and increased savings put a downward pressure on the inflation. Apart from that, an increase in the base rate promotes appreciation of the domestic currency, which, in turn, has a downward pressure on the inflation.

The change in the base rate has an impact on inflation in the medium term, according to the National Bank on the horizon of 12 months, in the short term its impact is limited.

The National Bank makes a decision on the base rate in accordance with a predetermined schedule.


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