Inflation in Kazakhstan remains elevated, the base rate may be increased later this year

KAZAKHSTAN - In Brief 09 Jun 2022 by Alexander Kudrin

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As opposed to Russia, where inflation decelerated fast (in May, it fell to 0.12% m-o-m and for several weeks, the w-o-w inflation remained at around zero), inflation in Kazakhstan was at 1.7% m-o-m in May. It was only slightly lower than the m-o-m inflation in April (2.0%). By the end of May, the Kazakh y-o-y inflation reached 14.0%, and the National Bank of Kazakhstan decided not to change its base rate, leaving it at 14.0%. Inflation w-o-w in the socially essential segment of basic foodstuffs remained at 0.4% in seven days ending on June 7, i.e., it was the same as a week ago.Headline inflation YTD reached in Kazakhstan 8.8% by the end of May, and it looks increasingly likely that in June, the inflation y-o-y will exceed 14.0% as in June 2021, it was at 0.7%, but this month it could well exceed 1.0%. While talking about the country’s high inflation, the National Bank of Kazakhstan quoted the decision of the government to amend expenditures and spend more this year. It also mentioned rising food inflation globally and the unstable geopolitical situation in the region.One of the direct factors that kept inflation in Kazakhstan relatively high was the recent abnormal strengthening of the ruble against major global currencies. This strength translated into the weakening of the tenge against the ruble in April and May. Instead of a traditional range of RUB/KZT 5.5-6.0, one ruble currently costs around KZT7.5. Given that Russia is one of the major food exporters to Kazakhstan, food inflation remained relatively high in the latter. As the Russian inflation decelerates, inflation m-o-m in Kazakhstan may start decelerating also. Albeit, a more visible disinflation would requi...