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The key instrument of the National Bank’s monetary policy is the base rate. By setting the level of the base rate, the National Bank determines the indicative value of the interbank short-term rate in order to achieve the objective of ensuring price stability in the medium term.

Decisions on the base rate are made by the Monetary Policy Committee 8 times a year according to the approved decision-making schedule.

The operational benchmark that characterizes the target value of the interbank short-term rate is the TONIA indicator, the weighted average interest rate on REPO transactions for a period of one business day concluded in the automatic REPO sector on the Kazakhstan Stock Exchange.

A shift in the base rate affects the rate of inflation through money market interest rates and the exchange rate. For example, an increase in the base rate leads to an increase in money market interest rates, then to an increase in the cost of funds in the financial market, which, in turn, affects the decisions of the population and enterprises regarding consumption and savings. A decrease in consumption and an increase in savings have a downward effect on inflation. In addition, an increase in the base rate contributes to the strengthening of the national currency, which, in turn, has a downward effect on inflation.

Changes in the base interest rate influence inflation in the medium term, according to assessment by the National Bank, within a horizon of 1218 months. In the short term, its effect is limited.

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