IMF mission recommends Kazakh National Bank keep pushing towards fully-fledged inflation targeting

ALMATY. Oct 11 (Interfax) - An International Monetary Fund mission has recommended that the National Bank of Kazakhstan continue to lead the transition to fully-fledged inflation targeting, the regulator said.

An IMF mission led by Nicolas Blancher visited Almaty and Astana during September 22-October 5.

"The inflation targeting regime has served Kazakhstan well and efforts to consolidate the framework should continue. As the transition to fully-fledged inflation targeting progresses, the NBK's credibility needs to be further strengthened," according to the IMF statement.

The IMF sees phasing out non-core and quasi-fiscal mandates and protecting the NBK's independence as essential priorities.

"Fiscal consolidation should contribute to containing inflation while preserving priority social spending. The new fiscal rules can help to further reduce the non-oil fiscal deficit but a stronger institutional framework is needed," according to the concluding statement.

The IMF says that the macroeconomic stability and protection of the most vulnerable in society depends on further monetary policy tightening.

"A higher policy rate is necessary to anchor inflation expectations, bolster the credibility of monetary policy, and reduce the risk of adverse second-round effects arising from wage or exchange rate depreciation pressures," according to the statement.

The IMF also said that monetary tightening "may incur short-term economic costs, letting inflation rise and having to intervene more drastically later would inflict higher costs on the economy and population."