Surging inflation forces Kazakhstan’s National Bank to hike the policy rate to 18%

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The Monetary Policy Committee of the National Bank of Kazakhstan set the base rate at 18% per annum with a ±1 pp corridor. The hike responds to accelerating inflation—from 12.2% in August to 12.9% in September 2025—and reflects stronger domestic demand and expanding government spending.

Food prices made the largest contribution, with the segment up 12.7% and some categories rising faster due to more expensive imports and higher costs. Services inflation remains significant at 15.3%, while regulated services surged 30.4%. Non-food inflation also accelerated to 10.8% amid fuel-market liberalisation: gasoline and diesel rose by almost 12% y/y.



Monthly inflation climbed to 1.1%, core to 1.2%, which the regulator sees as evidence of persistent price pressures and secondary effects. Households’ inflation expectations remain elevated, and market forecasts for the year were raised to 12%. External risks persist: global prices for meat and vegetable oils have hit records and are feeding through to domestic prices. While inflation in Russia is slowing, it remains sticky in the EU (with the ECB holding rates), and in the US the Federal Reserve has shifted to cuts to support employment amid moderate price pressures.

Kazakhstan’s economy nevertheless continues to grow rapidly: GDP rose 6.5% in Jan–Aug 2025, versus 3.7% a year earlier. Fastest-growing sectors: transport & warehousing (+21.5%), construction (+18.1%), trade (+8.9%), mining (+9.6%) and manufacturing (+6.5%). Growth is concentrated in areas reliant on domestic demand and budget outlays, which adds to inflationary pressure.

The National Bank notes that inflation risks are largely home-grown—driven by strong demand, tariff reform, fuel-market liberalisation and tax-policy changes, including VAT. A weaker real effective exchange rate of the tenge also eased financial conditions and pushed inflation off its disinflation path. The tenge has depreciated by almost 0.2% against the US dollar since the previous rate decision on 29 August. FX sales from the oil fund of up to $700m (vs $500m in September) are expected to support the tenge.



Bloomberg reports the policy rate has hit a record high, while inflation is at a two-year peak. None of the five economists polled expected such a sharp move: four forecast a smaller hike and one a hold.



President Kassym-Jomart Tokayev has called inflation “the country’s main problem,” eroding household incomes. Prime Minister Olzhas Bektenov ordered tighter oversight of unjustified price increases and expressed hope that year-end inflation will dip below 11%. Trade and Integration Minister Arman Shakkaliev [leech=https://timesca.com/experts-say-kazakhstan-must-boost-manufacturing-to-tame-inflation]announced[/leech
] the gradual removal of state price controls on 19 socially important food items and a shift to targeted digital consumer support.

National Bank Chair Timur Suleimenov signaled potential tightening in retail lending rules. Options include cutting the cap on APR for unsecured loans to 46%, higher capital-reserve requirements and changes to debt-burden ratios—measures meant to cool consumer lending. A further rise in borrowing costs to at least 20% is also being discussed.

National Economy Minister Serik Zhumangarin noted that growth itself is feeding inflation. Since 2023, GDP has expanded by about 5% annually, and in 2024 the economy grew without oil for the first time. “From 2026, oil will no longer be the determining factor for GDP,” he said. “Investment growth has already exceeded $12bn, and we expect $24bn by year-end. Kazakhstan should follow the path of Asian economies, but with modern technology.”



Independent analysts argue that taming inflation requires scaling domestic manufacturing. Political scientist Gaziz Abishev stresses the need for industry linked to infrastructure, logistics, human capital and the internal market—not “showcase mega-projects.” “That creates jobs, supports SMEs, strengthens the tenge and reduces the budget deficit,” he said, urging openness to foreign industrial investment regardless of origin. Abandoning technological progress and industrial modernisation, he warns, leads to stagnation. “Science, technology and work — that’s the answer to both unemployment and inflation. This should become a national idea.”