Kazakhstan cuts base rate to 16.25% as inflation moves into single digits

The National Bank of Kazakhstan cut its base rate by 50 basis points to 16.25 per cent on 4 September, its third reduction since June, and warned that room for further easing is limited, according to the Governor's statement issued after the Monetary Policy Committee met. The corridor around the base rate is plus or minus one percentage point, Interfax-Kazakhstan reported.

The committee said the decision rested on the results of its forecast round. Annual inflation moved into single digits in August, falling for an 11th consecutive month to 9.8 per cent, the statement said. Food inflation slowed to 9.5 per cent, non-food inflation to 11.4 per cent and services inflation to 8.9 per cent. Monthly headline inflation held at 0.6 per cent and core inflation at 0.7 per cent. The bank's target is 5 per cent.

The Governor, T.M. Suleimenov, credited the policy stance, a stable tenge, a normalisation of consumer demand and joint measures with the government for the disinflation, but kept the language cautious. The balance of risks "remains tilted to the pro-inflationary side", the statement said, and the committee intends to keep conditions moderately tight. It added that "the scope for further rate cuts is limited".

What the committee expects

The bank kept its 2026 inflation forecast at 9 per cent to 11 per cent and raised its 2027 forecast to 6.5 per cent to 8.5 per cent, citing higher external inflation, revised assumptions for regulated prices and a stronger fiscal impulse than in the government's previous socio-economic forecast, according to the statement. Inflation is expected to settle close to 5 per cent in 2028. The full set of projections through 2028 was published on 9 September in the bank's Monetary Policy Report.

Growth is running ahead of the inflation picture. GDP rose 4.1 per cent year on year in January to July, or 5.4 per cent excluding mining, and fixed capital investment rose 7.7 per cent, the statement said. The 2028 growth forecast was raised to 4 per cent to 5 per cent, reflecting planned extra transfers from the National Fund. The oil price assumptions are unchanged at $89 a barrel for 2026, $75 for 2027 and $65 for 2028. The bank said the rescheduling of maintenance at Tengizchevroil from 2026 to 2027 will weigh on oil output next year.

Household inflation expectations are easing. One-year-ahead expectations fell from 13.4 per cent to 12.1 per cent in July, while professional market participants kept their expectation for the current year at 10 per cent, according to the same source.

Liquidity and external backdrop

Rate policy is being supported by liquidity tightening. Minimum reserve requirements were raised in September as the final of three stages, which the bank expects to lift required reserves to KZT 4.3 trillion. The National Bank said it is now absorbing up to KZT 7 trillion of excess liquidity from the money market through its instruments, according to the statement.

The Governor pointed to an external environment that is pushing in the opposite direction. The conflict in the Middle East is raising energy prices and inflation in advanced economies, and central banks there have shifted to more cautious or tighter stances, he said, according to the statement. It cited EU inflation at 3 per cent in July, US price growth at 3.4 per cent and Russian inflation at 6 per cent, with the Bank of Russia having cut its key rate to 14 per cent in July while adopting a more restrictive tone. The bank said slower normalisation of inflation in Russia, its key trading partner, will also affect the outlook.

Market view and next decision

The cut equalled the upper end of the range analysts had been weighing. Interfax-Kazakhstan reported on 3 September that analysts were divided between holding at 16.75 per cent and cutting by 25 to 50 basis points.

The next base rate decision is scheduled for 23 October. In the statement the committee said it will weigh the effects of fiscal and quasi-fiscal policy, increases in regulated prices and their second-round effects, and that all subsequent decisions will be based on incoming data and an assessment of the balance of risks.