Kazakhstan Keeps Base Rate At 15.25% Amid Rising Inflation

Kazakhstan’s National Bank opted to keep its base rate at 15.25%. This decision comes as inflation remains a key challenge in the country’s economic landscape.

Inflation and economic growth insights

In December, inflation in Kazakhstan stood at 8.6%, staying within the predicted range of 8-9% for 2024. Rising service prices and a sharp increase in non-food product costs since August have contributed significantly to inflation. These factors are further exacerbated by the ongoing Tariff-for-Investments initiative and the depreciation of the tenge. At the same time, stable inflationary trends indicate continued demand-side pressures driven by government fiscal policies.

Public expectations regarding future inflation have been volatile, reflecting uncertainty about future price movements. On the global stage, inflation remains elevated, partly due to rising food prices and increasing inflation in neighbouring Russia. Economies in developed countries have also experienced slight upticks in inflation after a period of steady decline, suggesting that external monetary conditions could remain tight for the foreseeable future. This trend has prompted the US Federal Reserve to revise its rate cut forecast.

Strong economic activity and persistent demand

By the end of 2024, Kazakhstan’s economic growth accelerated to 6.2%, showing signs of potential overheating. All major sectors have seen growth, with agriculture, construction, trade, and transport experiencing the most significant gains. Manufacturing output also saw improvements during the period.

Domestic demand continues to outstrip supply, bolstered by increased government spending, rising incomes, and investments in non-resource sectors. This robust demand is reflected in the growth of retail trade and consumer lending. The National Bank’s business activity index has remained in positive territory for 11 consecutive months.

Inflationary risks and pressures

Inflationary risks remain on the horizon. Externally, inflation in Russia continues to pose a risk, while domestic challenges include continued price reforms, the effect of a weaker tenge, and strong internal demand. These factors, along with unanchored inflation expectations and rising consumer lending, contribute to ongoing inflationary pressures.

Monetary conditions have loosened slightly, influenced by a weaker tenge, heightened inflation expectations, and rising inflation. The Monetary Policy Committee will continue to monitor these factors and assess whether further tightening is necessary to guide inflation back toward the 5% target.

The next base rate decision will be announced on March 7, 2025, at 12:00 (Astana time).