National Bank of Kazakhstan raises rates in October

Rate hike was larger than expected: At its meeting on 10 October, the National Bank of Kazakhstan (NBK) increased the base rate from 16.50% to 18.00% with a corridor of plus or minus one percentage point, sticking to the forward guidance from its previous meeting in August. Markets had penciled in a softer increase in interest rates.

NBK aims to avoid an inflationary spiral: The decision to tighten monetary conditions was primarily driven by accelerating inflation, which hit 12.9% in September and surpassed the Bank’s expectations. Domestic factors have largely caused the uptrend in inflation: Consumer lending is elevated, the government is pursuing an expansionary fiscal policy, and liberalization of the fuel market has led to significant fuel price increases. In addition, inflation expectations continued to run high. By hiking rates, the NBK thus sought to anchor inflation expectations and increase real interest rates.

Panel split: Hike or hold in final 2025 meeting: The NBK indicated that additional monetary tightening will be considered should the recent increase in interest rates fail to stabilize inflation. Half of our panelists expect rates to be stable for the rest of this year, with the other half forecasting an additional 100 basis point increase by year-end. By the end of 2026, a majority our panelists see rates 50–150 basis points below current levels. The NBK will reconvene on 28 November for its last meeting of the year.

Panelist insight: Commenting on the outlook, Basak Edizgil and Clemens Grafe, analysts at Goldman Sachs, stated: “We continue to believe that the September inflation print likely marks the peak of the current cycle, and we see inflation falling slightly to 12.4%yoy by year-end. This downward trend should be supported by the absence of further utility price increases, softer inflation in both regulated and market services, and a stable FX environment—all factors that previously contributed to higher inflation in H1. Additionally, the rate differential of approximately 6pp with Russia has now closed. With external rate pressures largely dissipated and inflation likely having peaked, we expect the Bank to remain on hold going forward. Nonetheless, risks to our inflation and interest rate forecasts remain tilted to the upside if food inflation re-accelerates.”

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