Inflation in Kazakhstan moderates in January but still remains high

KAZAKHSTAN - In Brief 03 Feb 2023 by Alexander Kudrin

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Inflation m-o-m decelerated to 1.1% in January and was down from 1.2% in December, 1.4% in November, 1.6% in October, and 1.8% in September. Even though the m-o-m deceleration of inflation looks steady, it reached 20.7% y-o-y in January. Food price inflation reached 25.7% y-o-y, and in the non-food segment, it was at 20.2%. In the services segment, inflation was lower – at 14.2% as the authorities regulate prices for some services, such as transport. Food prices grew fast in Kazakhstan as many food products are imported, and food inflation remains a global issue. In February, inflation m-o-m may continue to decelerate (possibly to 1.0% or 0.9%), which will still mean rising inflation y-o-y, as in February 2021, it was at 0.8%. From March, inflation y-o-y will go down as in March last year it was at 3.7%. In February, y-o-y inflation can climb to 21%, while in March, it can go down below 18% amid base effects. Generally, the National Bank of Kazakhstan can keep the base rate at 16.75% (the decision on the rate is due on February 24) as inflation decelerates naturally and can come below 17% in April. However, if the economic situation improves further in January, the NBK may raise the base rate by 25 bps or 50 bps. Hence, it will signal that it is ready to tighten to bring down inflation as soon as possible. Currently, the annualized 6M moving average inflation stays at 18.4%, while the 3M moving average (also annualized) is at 15.8%. Evgeny Gavrilenkov Alexander Kudrin