Inflation likely to stay elevated in August prompting NBK to hold the base rate

KAZAKHSTAN - In Brief 22 Aug 2025 by Evgeny Gavrilenkov

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According to the Bureau of National Statistics, the weekly aggregate price index on socially essential goods (mainly basic foodstuffs) remained flat in the seven days ending on August 18. The MTD index remained at 0.1% on that day. It is not unusual to see some deflationary weeks during the harvesting season, as it was recorded a year ago. In 2024, on the same day of August, the Bureau reported w-o-w and MTD deflation numbers (0.1% and 0.4% respectively). Still, inflation m-o-m remained high in August 2024 (0.6%) amid the economy's overheating due to rapidly expanding household credit and generous budgetary spending. Household credit expanded by 2.2% m-o-m each month in June and July 2024, having accelerated from 1.4%-1.6% m-o-m in the preceding couple of months. This year, the situation resembles last year's, as household credit grew m-o-m by 2.0% in June and July, having similarly accelerated compared to the previous months. In July, inflation was at 11.8% y-o-y. We recently mentioned that budgetary expenditures are set to increase significantly in 2H25 amid upwardly amended spending and a high amount of delayed spending. Spending could have already increased in August, as the price dynamics of socially essential products hint. Hence, August 2025 inflation might be even higher than in August 2024. Rapidly growing consumer credit may be another reason for NBK to hold the base rate at 16.5%. Meanwhile, the odds that the regulator could even raise the base rate now seem somewhat higher than a month ago. The Committee on Monetary Policy's next meeting is due on August 28.