Inflation likely remains elevated for the rest of the year, prompting no rate cuts from NBK

KAZAKHSTAN - In Brief 04 Aug 2025 by Evgeny Gavrilenkov

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The Bureau of National Statistics reported that inflation decelerated m-o-m from 0.8% in June to 0.7% in July. However, the y-o-y price index remained unchanged at 11.8%. Services prices grew y-o-y by 14.9% (down from 16.1% in June), food prices were up by 11.2% (up from 10.6% in June), and the non-food price index moved to 9.5% (up from 9.4% in June). The Monetary Policy Committee of the National Bank of Kazakhstan kept the base rate at 16.5% on July 11 and mentioned that the government intended not to raise regulated tariffs as planned earlier and extended the timing of regulated tariffs adjustment. Hence, service price inflation softened last month. Accelerated y-o-y inflation in the food and non-food segments hints the economy remains overheated, not least because lending to households growth by about 2.0% m-o-m. Still, household credit (slightly above KZT25.1 trln as of mid-year) remains low compared to the expected about KZT155-160 trln GDP (KZT 136.7 trln in 2024). Therefore, debt servicing pressure is not that high yet. As the economy is growing fast enough in 2025, with inflation elevated, the NBK mentioned it would stay on hold and could even hike the base rate if inflationary pressure rises further. The latter may happen, as budgetary expenditures were upwardly amended (on the regional level), and the initially planned spending was not fully financed. Hence, one may see more spending and rising inflationary pressure for the rest of the year. The same happened in 2024 when a budgetary spending spree fueled inflation in 4Q24 (inflation then jumped to 0.9% m-o-m each month from 0.6% and 0.4$ in August and September). Hence, the odds of seeing a higher base rate...