NBK holds the base rate; inflation accelerates

KAZAKHSTAN - In Brief 02 Sep 2025 by Evgeny Gavrilenkov

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A few days ago, the National Bank of Kazakhstan kept the base rate unchanged, citing inflation remaining high in July (at 11.8%). The regulator acknowledged that inflationary pressure would remain elevated for the rest of the year and mentioned the possibility of future rate hikes. The NBK expects inflation to range between 11.0% and 12.5% this year. Today, the Bureau of National Statistics reported that month-on-month inflation accelerated to 1.0% in August (up from 0.7% in July), while year-on-year inflation rose to 12.2%. In earlier notes, we anticipated inflation would stay high throughout the year, particularly as government spending is set to soar. Following tradition, expenditures were revised upward, leaving over KZT 3.0 trillion unallocated (on top of what was initially planned). This environment makes stable prices unlikely. As a result, inflation in the coming months could exceed August levels, pushing year-end inflation beyond the NBK’s forecast range. The NBK’s next meeting is on October 10, and we predict the regulator may yield to the temptation of raising the base rate, possibly by 50 basis points. Earlier this year, after the NBK raised the rate to 16.5% in mid-March, we expected it to decrease eventually, hoping for disinflation. However, with the government opting for even more generous spending than in past years, these expectations have faded. Meanwhile, economic growth has also picked up this year. Reviewing the available statistics, it appears growth has been driven primarily by increased investments in production capacity (including private and foreign direct investment, not just public investments) and rapidly expanding household credit, rather...