Inflation y-o-y rises amid a slow deceleration m-o-m prompting no decisive action from the NBK

KAZAKHSTAN - In Brief 03 Jul 2025 by Evgeny Gavrilenkov

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Inflationary pressure remains high as the Bureau of National Statistics reported inflation moved from 11.3% in May to 11.8% in June. However, it moderately decelerated last month to 0.8% m-o-m (versus 0.9% m-o-m in May and even higher numbers earlier this year). A year ago, inflation m-o-m was 0.4% for both months in May and June, and it started picking up in 2H24 amid rising budgetary expenditures. In 1H24, spending lagged for both the republican and local budgets alike. In mid-year, local budgetary spending was upwardly amended and inflation accelerated amid a spending spree. The echo was felt even in 1Q25. Hence, the recent rise of the y-o-y inflation amid a gradual deceleration of the m-o-m one. In June 2025, inflation in the services segment reached 16.1% (versus 16.0% in May). Food inflation climbed to 10.6% (from 9.6% in May), and non-food inflation moved to 9.4% from 9.0% in May. Rapidly rising service prices indicate the economy is overheating. High food inflation also points to rising import prices, including for Russian products (not least due to the tenge’s weakening against the ruble, as the latter abnormally appreciated against major global currencies). In such an environment, the NBK will likely refrain from any radical moves (the next decision on the base rate is due on July 11) as inflation m-o-m slowly comes down. Due to the base effects, inflation y-o-y will likely stop rising as fast as in recent months. On the one hand, however, domestic lending remains strong, and budgetary spending will increase in 2H25. Historically, the NBK’s policy was never aggressively pre-emptive, and inflation remains within the 2025 range target (10.5%-12.5%). Hence, we d...