Inflation accelerates in September, prompting the National Bank to raise rates

KAZAKHSTAN - In Brief 05 Oct 2022 by Alexander Kudrin

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Kazakhstan’s Bureau of National Statistics reported that inflation reached 1.8% m-o-m, 15.4% YTD, and 17.7% y-o-y in September. Even though the September figure was higher than expected, price increases differed across segments of the consumption basket. Food items became more expensive by 1.2% m-o-m, which brought the YTD and y-o-y rates to 19.7% and 22.4%. Generally, food inflation in September didn’t differ much from the monthly rates recorded in summer. From June to August, monthly food inflation varied from 1.0% to 1.9%. In contrast, communal services in September became more expensive by 4.2%, while prices for educational services were up by 7.9%. Still, the YTD and y-o-y inflation rates in these two segments were well below that in the food segment (11.8% and 14.7% in communal services and 13.3% and 13.8% in education). Inflation m-o-m for non-food household items was also high (3.3%), so the YTD and y-o-y figures climbed to 22.2% and 23.6%.One may conclude from the above statistics that inflation in Kazakhstan remains elevated and will remain relatively high as budgetary spending increases to catch up with the amended expenditure target. Hence inflation is not falling in the food segment, especially as global food prices keep growing, and Kazakhstan is dependent on food imports. Non-food inflation remains high due to overheated demand, as the country strongly depends on imports of various consumer items. Therefore, The National Bank of Kazakhstan is likely to raise its base rate on October 26, albeit moderately, as recent high m-o-m inflation for educational and communal services was most likely a one-off effect. Evgeny Gavrilenkov Alexander Kudrin