Inflation accelerates, base rate hike is likely in March

KAZAKHSTAN - In Brief 03 Mar 2025 by Evgeny Gavrilenkov

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The Bureau of National Statistics reported that in February, inflation m-o-m accelerated to 1.5% (versus 1.1% m-o-m in January). The y-o-y tally climbed to 9.4% (versus 8.9% in January). Prices rose across the board – for services, food, or non-food items. The latter implies that the main reason for accelerating inflation is not a previous weakening of the tenge but the economy overheating in general. One cannot rule out that the NBK may raise the base rate from the current 15.25% on March 21 at the next BoD meeting. Meanwhile, the National Bank of Kazakhstan recently reported about various types of FX interventions in February and planned interventions in March. On behalf of the government, the NBK sold from the National Fund $600 mln to secure transfers to the budget (and will sell from $700 to $800 mln in March). The NBK also reported that it orchestrated no direct interventions on the FX market to support the tenge in February. However, it acknowledged that in the aftermath of gold purchases from domestic producers, it sold $250 mln to sterilize the tenge liquidity associated with these operations (the NBK calls it “mirroring operations”). On top of that, the NBK reported that due to changed regulations, the state-owned exporters sold $250 mln of foreign trade earnings (that appeared additional amid recently introduced partial mandatory sales of export revenues). The increased activity on the FX market explains the recent tenge appreciation to below USD/KZT500, and this trend is not supportive of the budget as it will again trim revenues linked to the exchange rate and the oil prices. It looks as though history may repeat itself once again – the budget may need mor...