Kazakh c.bank may up CPI target as pressures build

Aug 12. Reuters. ALMATY

By Olga Orininskaya

* High commodity prices, internal imbalances fuel inflation
* Increased wages, social payments weigh heavily on prices

Kazakh c.bank may up CPI target as pressures buildKazakhstan’s central bank may raise its inflation target for 2011 from the current 6.0-8.0 percent range because its monetary and credit policy may not be enough to curb inflationary pressures, it said in a statement.

Kazakhstan, Central Asia’s largest economy, weathered the global crisis and resumed fast growth last year when its gross domestic product expanded by 7.3 percent after a 1.2-percent rise in 2009. GDP is forecast to grow by 7 percent this year.

Kazakhstan’s annual inflation accelerated to 7.8 percent last year from 6.2 percent in 2009.

In a statement posted on its wesite (www.nationalbank.kz), the central bank said inflationary pressures in the $150-billion economy were building up on “positive trends in the country’s economic performance and remaining high prices on world raw material and food markets”.

Kazakhstan, the world’s ninth-largest nation by area but populated by just 16.5 million people, is a major exporter of oil, industrial metals and grain.

The central bank also cited increased wages, pensions, scholarships and other social benefits paid from the budget and also pointing to a lack of competition on the goods and services market within the country.

“Taking into account the minimal impact exerted on inflation by monetary factors, credit and monetary policy measures alone may turn out to be insufficient to ensure stable prices on Kazakhstan’s consumer market,” the bank said.

“Under the circumstances, the National Bank does not rule out raising its (inflation) target for 2011.”

Month-on-month inflation in Kazakhstan quickened to 0.5 percent in July from 0.2 percent in July 2010.

Consumer prices had grown by 5.6 percent in July since December, compared to 4.6 percent in the same period a year earlier. January-July inflation this year stood at 8.5 percent compared to the same year-ago period.

The central bank raised its key refinancing rate by 50 basis points to 7.5 percent in March, the fist revision of the rate in 18 months. National Bank Governor Grigory Marchenko said in July the bank would decide after the third quarter of 2011 whether to revise the refinancing rate and raise the 2011 inflation target.