Kazakhstan’s economy continues to grow at a strong pace, but inflation remains stubbornly high. Against this backdrop, the National Bank of Kazakhstan has decided to keep its base interest rate unchanged at 18%, signaling that the fight against inflation is far from over, DKNews.kz reports.
Speaking in Astana, National Bank Chairman Timur Suleimenov explained that while some early signs of disinflation have appeared, price pressures remain elevated, and risks are still tilted toward further inflation.
Inflation Has Peaked, but Pressure Remains
According to the National Bank, inflation reached 12.3% by the end of 2025, staying within the regulator’s forecast range. The inflation peak was recorded in September 2025 at 12.9%, after which price growth began to slow slightly toward the end of the year.
This moderation, however, has been uneven. The slowdown was most noticeable in non-food goods and services, helped by a moderately tight monetary policy, administrative cuts in regulated tariffs, and other anti-inflationary measures.
Despite these developments, the central bank stresses that inflationary pressure remains high, and price dynamics still show significant inertia.
Food Prices Are the Main Driver
Food inflation remains the most serious concern. In December, it reached 13.5%, making it the largest contributor to overall inflation.
Price growth in food markets has been uneven, driven by imbalances in specific segments. The most notable example is meat and meat products, where annual price growth surged to 22.6%, the highest level since January 2012. Sharp increases were also recorded for lamb, confectionery, apples, fish, fruits, vegetable oils, and fats.
These trends continue to fuel both food inflation and headline inflation across the economy.
Non-Food Goods and Services Show Some Relief
By contrast, non-food inflation slowed to 11.1%, supported by the strengthening of the tenge, which reduced the cost of imports. Monthly non-food price growth eased to 0.7%, down from 0.9% in November.
Service-sector inflation also moderated to 12.0%, largely due to the government’s temporary moratorium on increases in regulated utility tariffs. However, price growth remains strong in market-based services such as tourism, healthcare, and rental housing. Excluding utilities, service inflation stands at 12.9%.
Core inflation indicators remain elevated, suggesting that underlying price pressure has not yet weakened sufficiently.
Maxim Zolotukhin/DKNews.kz
Inflation Expectations Are Rising
One of the key concerns for policymakers is the rise in inflation expectations. Public expectations for inflation over the next year increased to 14.7%, while forecasts by professional market participants for 2026 were revised upward from 10.0% to 10.8%.
At the same time, longer-term expectations over a five-year horizon eased slightly to 14.3%, which the National Bank views as a cautiously positive signal.
Still, the overall balance of risks remains pro-inflationary, reinforcing the need to maintain tight monetary conditions.
Strong Economic Growth Fuels Demand
Kazakhstan’s economy continues to perform strongly. GDP growth reached 6.5% year-on-year, driven primarily by transport, construction, mining, trade, and manufacturing.
Domestic demand remains resilient. Retail trade expanded by 7.5% in real terms in 2025, and sales of non-food goods accelerated in December, partly reflecting consumer behavior ahead of anticipated tax changes.
At the same time, real household incomes remain under pressure from inflation, and unsecured consumer lending has slowed. Growth in new unsecured consumer loans fell to 7.3% over the first 11 months of 2025, a trend the National Bank views as a positive step toward easing inflationary pressure.
Investment Activity Remains High
Investment continues to support economic growth. Fixed capital investment rose by 13% in real terms, while private investment in non-resource sectors increased by 19.1%, indicating sustained business confidence despite tighter financial conditions.
External Environment: Mixed Signals
Globally, inflation pressures are easing, particularly due to improved conditions in international food markets. However, global food prices remain elevated, especially for beef and grains. Wheat prices, in particular, have risen due to supply disruptions in the Black Sea region.
Inflation in Russia, Kazakhstan’s key trading partner, is gradually slowing under tight monetary conditions, while inflation in the European Union is expected to stabilize near target levels in the medium term.
In the United States, the Federal Reserve began gradually lowering interest rates in 2025, while maintaining a cautious stance. At the same time, rising geopolitical tensions — particularly in transatlantic trade relations — add uncertainty to the global outlook and could affect inflation dynamics.
Oil prices remain broadly aligned with the National Bank’s baseline scenario, with Brent crude trading around $65 per barrel.
Maxim Zolotukhin/DKNews.kz
Why the Base Rate Will Stay High
Given these conditions, the National Bank considers it too early to declare a stable disinflationary trend. Chairman Suleimenov emphasized that moderately tight monetary conditions must be preserved to anchor inflation expectations and ensure a sustainable slowdown in price growth.
The central bank expects the base rate to remain at 18% at least through the first half of 2026, unless inflation shows clear and consistent signs of declining.
Fiscal and Regulatory Risks Ahead
Looking forward, the National Bank highlights several risks:
- The implementation of a large-scale tax reform, including a higher VAT rate and a broader tax base
- The possible restart of tariff and price reforms after the first quarter of 2026
- The inflationary impact of large quasi-fiscal investment programs, including projects under the Baiterek holding
These factors will require close monitoring to assess both their direct and secondary effects on prices.
Coordinated Anti-Inflation Strategy
The National Bank is working closely with the government and financial regulators under a joint macroeconomic stabilization program for 2026–2028. Measures include fiscal consolidation, tighter liquidity management, stricter macroprudential rules, and limits on consumer lending growth.
According to Suleimenov, these coordinated actions have already helped neutralize several key inflation risks from 2025, though inflation itself remains elevated.
The Long-Term Goal Remains Unchanged
The National Bank reiterated that its medium-term inflation target remains 5%. Achieving this goal will require sustained policy discipline, careful coordination with fiscal authorities, and a continued focus on price stability.
“Low and stable inflation is the foundation of sustainable economic growth and rising living standards,” Suleimenov concluded.
