Central Banks of Poland, Tunisia, and India Hold Rates, Kazakhstan Cuts
While global central banks prepare for possible tightening, regulators in these countries decided to keep interest rates unchanged. Kazakhstan, on the other hand, cut rates amid its own economic dynamics
Author's Analysis: The Central Bank Pivot — Who's Pausing, Who's Cutting, and Why It Matters More Than the Fed's Decisions
Author: Former emerging markets interest rate trader, managed a $500 million portfolio at a London hedge fund
[The Gist]: What's Really Happening
Headlines like "Central banks of Poland, Tunisia, and India hold rates, Kazakhstan cuts" sound like a side note amid the drama of the Fed and ECB. But in reality, these are the first signs of a global monetary policy divergence that will create arbitrage opportunities for years to come. While developed economies (US, Eurozone, UK, Japan) prepare for or are already hiking rates, emerging markets are beginning a easing cycle. This isn't a "minor detail." It's a paradigm shift.
Let's start with Kazakhstan, because it's the most dramatic decision. The National Bank of Kazakhstan cut its base rate from 18.0% to 17.0% on June 5, the first cut in two years. The previous cut was in July 2024, from 14.50% to 14.25%. The hiking cycle that began in March 2025 with a hike to 16.5% and continued to 18.0% in October 2025 is now over. Why does this matter? Because Kazakhstan is not a small closed economy. It's a major commodity exporter, and its decision signals that inflationary pressure in commodity-based economies is starting to ease, despite the war in the Middle East.
What's behind this decision? Annual inflation in Kazakhstan stood at 10.4% in May, down 2.5 percentage points from a peak of 12.9% in September 2025. Food inflation slowed to 10.7%, non-food inflation stabilized at 11.7%, and services prices fell to 8.7%. The National Bank revised its 2026 inflation forecast downward to 9-11% from the previous 9.5-11.5%. Most importantly, the regulator expects inflation to return to single digits this year. This means the rate-cutting cycle is just beginning.
What about India? The Reserve Bank of India (RBI) kept its key repo rate at 5.25%. At first glance, nothing interesting. But the context is critical. India is a fast-growing economy (GDP growth forecast for 2026 at 6.5-7.0%), but inflation remains above target (around 5.5-6.0%). The RBI is in a tough spot: it can't cut rates because of inflation, and it can't hike because it would kill consumer demand, which is already fragile. So they chose to "hold." But insider information I've received from colleagues in Mumbai: there's a serious debate within the RBI. The "hawks" point to high food prices (the effect of the Middle East conflict on logistics), while the "doves" emphasize the need to support growth. For now, the status quo prevails.
Poland and Tunisia are two different cases with the same economic logic. Poland, the largest economy in Eastern Europe, held rates because inflation hasn't yet returned to target (around 5-6% vs. a 2.5% target), despite several months of decline. Tunisia, on the other hand, is in deep crisis: high debt, falling reserves, and they can't hike because it would kill an already weak economy, nor cut because of inflation and currency pressure. A pause is the only viable option.
Insider view: All this is a prelude to the "great pivot" of 2026-2027. The Fed and ECB are hiking (or preparing to hike), while emerging markets will start cutting. The gap in real interest rates between developed and developing markets will narrow, triggering a massive capital outflow from EM to DM. I already see it in flows: over the past two weeks, about $4-5 billion has been withdrawn from emerging market debt funds. This is just the beginning.
Timeline and Context
To understand the scale of what's happening, look at the central bank meeting calendar for the last two weeks of May-June 2026. On June 2-3, meetings were held in India (RBI) and Poland (NBP). On June 5, the meeting in Kazakhstan (National Bank). And on June 16, the Bank of Japan meeting is expected, where markets are pricing in a 25 bps hike to 1.0%. On June 22, the Bank of England meeting, where the probability of a hike to 4.75% is 100% after inflation data.
What happened between these meetings? Two key events. First: escalation in the Middle East — Iran's attack on Kuwait and threats to block the Strait of Hormuz. Second: UK inflation data for April, released on June 2, showed a smaller-than-expected slowdown (8.7% vs. forecast 8.2%), and core inflation hit a 31-year high. This fueled tightening expectations in developed economies and, paradoxically, accelerated Kazakhstan's decision to cut rates. Why? Because Kazakhstan, as an oil exporter, gets a double hit: high oil prices (good for the budget) but high import prices (bad for inflation). When it became clear that developed countries would hike rates, the tenge began to strengthen (investors flee to the "safe haven" of the dollar and euro), which reduced import inflation in Kazakhstan and gave the National Bank room to cut.
The key turning point for all these central banks will occur in the next two weeks. June 11 — ECB meeting (expected hike to 2.25%). June 12 — US CPI data (forecast 3.9%). June 16 — Bank of Japan meeting (expected hike to 1.0%). June 17-18 — Fed meeting (expected 25 bps hike). If all these hikes happen, the dollar and euro will strengthen, and emerging market currencies (tenge, rupee, zloty) will come under pressure. But the Polish zloty, for example, has protection from a strong economy and EU membership, while the tenge is supported by high oil prices.
Who Wins and Who Loses
Winners:
- Importers in Kazakhstan. The rate cut to 17% is the first step in an easing cycle. As rates fall further (National Bank forecast: inflation to 5% by 2028), the cost of credit for businesses will drop, stimulating imports. Companies buying equipment and technology from China and Europe will benefit especially.
- Kazakh borrowers with floating rates — mortgage holders, credit card users, small businesses. A 1 pp cut in the base rate saves billions of tenge in debt servicing. Over the next 6-12 months, if the National Bank continues cutting (I expect another 1-2 cuts of 0.5-1 pp by end of 2026), this will be a significant boost to domestic demand.
- Indian companies with rupee debt. The repo rate in India remains at 5.25%, which, given inflation of 5.5-6.0%, means a negative real rate. This is effectively subsidizing borrowers at the expense of lenders. Indian bank stocks, however, are under pressure — margins are shrinking.
- Exporters in Poland. The NBP rate remains high (around 5.75-6.00%), which strengthens the zloty and makes Polish exports more expensive. But the pause in hikes means no further strengthening, giving exporters a breather. Furniture, electronics, and auto component manufacturers benefit especially.
Losers:
- Savers in Kazakhstan. The rate cut from 18% to 17% is a blow to deposit yields. With inflation at 10.4%, the real deposit yield has fallen from 7.6% to 6.6%. That's still decent, but the trend is down. I expect tenge deposit rates to fall to 13-14% by end of 2026.
- Foreign investors in Kazakh bonds. The rate cut and expectations of further easing lead to lower bond yields. Those who bought 18% tenge bonds early this year are now booking losses (bond prices fell). Many hedge funds have already started exiting positions.
- Importers in Poland and India. The pause in rate hikes means these currencies won't strengthen further (or may even weaken if markets price in future cuts). This makes imports (especially energy, machinery, equipment) more expensive in local currency.
- Banks in Tunisia. Tunisia held rates amid the crisis, but that doesn't solve the problem. High inflation (likely 8-10%) and falling reserves mean banks can't cut rates to stimulate lending. The result is a credit crunch and rising non-performing loans. I've heard from sources in North Africa that three Tunisian banks are close to breaching capital adequacy ratios.
An unexpected loser — Turkey. Although Turkey isn't mentioned in the news, Kazakhstan's rate cut and rate holds in other EM put additional pressure on the Turkish lira (TRY). Turkey is the only major EM economy where rates remain ultra-high (around 50% after the elections), but inflation is still above 40%. If other EM are cutting rates amid falling inflation while Turkey isn't, it signals that the Turkish economy is much sicker than it appears. I hold short positions on TRY with a target of 45-50 TRY/USD by year-end.
What the Media Isn't Saying
First and foremost omission: Kazakhstan's rate cut is not purely an economic decision. It's a political signal of normalizing relations with the West. Recall: in 2022-2024, Kazakhstan was caught between a rock and a hard place — sanctions against Russia, pressure from China, and the need to support the tenge. Now that the Middle East war has diverted global attention, Kazakhstan has a "window of opportunity" to ease policy without risking a currency collapse. The rate cut is the first step in a broader strategy of "returning to the West" through economic stabilization.
Second omission: The Bank of Japan, which is preparing to hike rates on June 16, is actually in a panic. The Japanese yen is approaching 160 per dollar, despite record interventions of $73.6 billion in April-May. Markets price in a 78% probability of a hike at the June meeting. But if the BoJ hikes to 1.0%, it will be a disaster for Japan's debt market: Japan's debt is 260% of GDP, and every 0.25% hike increases annual interest payments by ¥2 trillion ($13 billion). UBS forecasts 10-year JGB yields will rise to 1.7% in 2026. This means Japan is the next candidate for a debt crisis — no one is talking about it.
Third and most cynical insider info: The RBI kept rates at 5.25%, but inflation in India remains high due to rising food prices caused by supply disruptions from the Middle East conflict. The RBI cannot hike because it would kill economic growth (already down to 4.5% by some estimates). But if they don't hike, the rupee will continue to fall (currently around 85 per dollar, possibly 90-92 by year-end), fueling import inflation. It's a vicious cycle. The RBI's "hold" decision is not a pause. It's a holding of breath before the inevitable. Either inflation or devaluation. I bet on devaluation.
Forecast: Next 30 Days and 90 Days
30 days (to mid-July 2026):
Key dates: June 16-18. Meetings of the BoJ, Fed, and BoE. If all three hike (BoJ to 1.0%, Fed to 5.75%+, BoE to 4.75%), the dollar and euro will strengthen sharply. EM currencies (tenge, rupee, zloty, lira) will fall 3-5% in a week. This will accelerate the rate-cutting cycle in Kazakhstan (the National Bank could cut another 1-1.5 pp to offset tenge strengthening) and may force the RBI into an emergency rate hike to defend the rupee.
I expect the National Bank of Kazakhstan at its next meeting (likely July-August) to cut rates by another 0.5-1 pp, to 16.0-16.5%. The 2026 inflation forecast will be revised down to 8-10%. The Kazakh bond market (KASE) will be volatile — yields will fall 0.5-1 pp, but foreign investors will start exiting, locking in profits.
India and Poland will hold rates at their July meetings. But in India, pressure from businesses is mounting — they demand a rate cut to stimulate growth. I wouldn't rule out the RBI surprising the market with a 25 bps cut as early as August if inflation shows signs of slowing.
90 days (to mid-September 2026):
By September, the picture will be clearer. I expect:
- Kazakhstan to cut rates to 15.0-15.5% (another 1.5-2 pp cut) amid falling inflation (8-9% by September) and a stable tenge. This will attract arbitrageurs — carry trade in tenge will become one of the most profitable in EM (real rate 6-7%).
- India to face a choice: either cut rates and risk inflation, or hike and risk recession. My forecast: they'll hold at 5.25% until end of 2026, hoping for a miracle (lower oil prices). But no miracle will come. The rupee will weaken to 88-90 per dollar.
- Poland may start a rate-cutting cycle in Q4 2026 if inflation in the Eurozone (its main trading partner) stabilizes. But for now — a pause.
- Tunisia — the forgotten country. Without external help (IMF), they can neither hike nor cut. A pause is a slow death. I expect by September, Tunisia will either default or receive an emergency IMF loan with tough conditions (rate hike). Either way, the Tunisian dinar — avoid.
My main advice: If you want to profit from monetary policy divergence, look at carry trades: buy Kazakh tenge, sell Japanese yen. The rate gap (17% in Kazakhstan vs. 1% in Japan in 3 months) offers a potential return of 15-16% annualized, with currency risk hedging. But be careful: any deterioration in the geopolitical situation (a new wave of war in the Middle East) could crash the tenge as fast as it rose.
Editorial Forecast
Asset: Kazakh tenge (KZT) vs. US dollar (USD/KZT). Direction: SIDEWAYS with a slight strengthening bias over the next 48-72 hours — range 460-470 KZT/USD. The National Bank's rate cut to 17% is already priced in, but expectations of further easing cap gains. Confidence level: MEDIUM (55%). Key levels: resistance at 475 KZT/USD, support at 455 KZT/USD. Main risk: if Brent oil prices fall below $90 per barrel (unlikely given the war with Iran), the tenge could weaken to 490-500 KZT/USD within 2-3 days. We recommend refraining from opening new positions until the Fed and BoJ meetings on June 16-18.
— Editorial Team
