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The government has signaled readiness to support liquidity in the financial system through open market operations (OMO), foreign exchange swaps, and refinancing facilities. KBSV expects interest rates to peak in early Q2 2026 and to ease more clearly in the second half of 2026.
After the April 9, 2026 meeting, KBSV said the level of interest rates in the second quarter is likely to show a modest decline from the peak. This follows the commitment to reduce the deposit rate by 0.5–1 percentage point per year for commercial banks’ deposits.
However, KBSV cautioned that the downward trend may not be clearly visible in the short term because liquidity tensions are expected to persist in Q2. The main reasons include:
KBSV also pointed to developments in the Middle East creating double pressure on inflation and the exchange rate. This is expected to leave less room for the State Bank to support liquidity in the system.
Despite the near-term constraints, KBSV expects the easing trend to become clearer in the second half of 2026. It projects an average reduction of about 0.5–1 percentage point per year from the current level, supported by:
After the meeting with the new governor of the State Bank, lending rates have fallen only 50–100 basis points at a few commercial banks such as Agribank, NAB, and SSB. KBSV said these reductions are largely temporary and do not reflect broad-based adjustments across the system.
Overall, KBSV expects lending rates to hold steady at the current level in Q2, mainly because input rates remain high. It also cited that banks’ net interest margin (NIM) is still low compared to previous years and that credit risk remains evident.
Entering the second half of 2026, lending rates are expected to ease more clearly, aligning with reductions in lending rates to support economic growth. KBSV noted that the downward trend in this period is likely to be selective, focusing on growth drivers such as exports and industrial production.
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