The National Bank of Kazakhstan left the base rate unchanged

KAZAKHSTAN - In Brief 07 Sep 2022 by Alexander Kudrin

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On September 5, the National Bank of Kazakhstan decided to leave its policy rate at 14.5% despite the fact that inflation in August accelerated m-o-m to 1.4% from 1.1% in July as reported by the Bureau of National Statistics. In May inflation was also 1.4% m-o-m while in June it was slightly higher (1.6%). Overall, in recent months inflation has seemingly stabilized and the regulator saw no reason to hike the base rate any further. Even though the CPI in general was relatively stable, the driving forces of inflation were different. In August food prices grew by 1.0% m-o-m, i.e., less than the non-food (1.8%) and prices on paid services (1.6%) while in 1H22 food price inflation was higher than inflation in other segments of the consumer market. Prices on socially essential goods (such as basic foodstuffs) grew by 0.7% m-o-m. Non-food inflation remains high due to increased fiscal stimulus. The regulator also blamed weakening of the tenge against the ruble. Inflation y-o-y accelerated to 16.1% in August. Food price y-o-y inflation is still higher (20.1%) while non-food price inflation moved up to 15.5% y-o-y. The price index for services increased to 10.1%. Going forward, inflation y-o-y will keep accelerating as inflation m-o-m will remain above 1.0%, while a year ago, monthly inflation in September to December was well below 1.0%. The National Bank of Kazakhstan will likely stay on hold (at least for a while) if m-o-m inflation remains stable. Rate hike is possible if in 4Q22 inflation m-o-m starts going up steadily. In any case, the Kazakh inflation will start decelerating y-o-y only from March 2023 (or February at best). Evgeny Gavrilenkov Alexander Kudrin