Impact of the base rate on the inflation response of the economy

Abstract

The purpose of the article is to consider the impact of macroeconomic factors on the economic development of the country, to give an assessment and recommendations for improving the effectiveness of monetary policy in order to stabilize and achieve the goals of the inflation targeting strategy. Recently, we can observe a sharp increase in prices for socially important products, which directly indicates an increase in inflation in a country where the main institution responsible for curbing inflation is the Central Bank, whose strategy is aimed at ensuring price stability and implementing an inflation targeting regime. The main reason making it difficult to implement an inflation targeting strategy is the economic crisis caused by the coronavirus (COVID-19), which has bowed central banks around the world to new challenges. The first indicators of the crisis in many countries were production stoppages, sales curtailments and border closures. In particular, in Kazakhstan, this crisis had a strong impact on the economic state of the country, namely on the pricing of imported and domestic goods. The paper puts forward the hypothesis that the current monetary policy requires rethinking from the position of transformation of interest rate regulation policy. In order to substantiate this, a comparative analysis of the effectiveness and impact of the interest rate on inflationary shocks on the basis of officially published data was conducted. The role of the TONIA indicator in inflation management was determined and its changes were analyzed. The paper focuses on the analysis of interest rate impact on household deposits and loans, pricing and foreign trade turnover of Kazakhstan, which made it possible to develop recommendations.