Base rate cut by 25 basis points to 16.75 percent
The National Bank of Kazakhstan has lowered its base rate by 25 basis points to 16.75 percent. The Monetary Policy Committee cited nine consecutive months of easing annual inflation while maintaining moderately tight monetary conditions to reach its five percent target.
Nine months of easing and persistent pressures
The Monetary Policy Committee reduced the base rate to 16.75 percent as annual inflation declined to 10.3 percent in June, marking nine consecutive months of decreases.
Disinflation was supported by the restrictive policy stance, a strong tenge, and slowing consumer activity.
However, underlying monthly price growth accelerated, with core inflation reaching 0.9 percent and seasonally adjusted inflation rising to 1.0 percent.
Food inflation fell to 10.4 percent, while services inflation stood at 9.0 percent.
Household inflation expectations remained elevated at 13.4 percent, driven by concerns over fuel prices, utility tariffs, and potential value added tax changes.
Economic momentum versus capacity limits
Domestic economic activity expanded briskly, with gross domestic product growing 4.1 percent in the first half of the year, or 5.3 percent excluding the mining sector.
Fixed capital investment rose 9.6 percent year-on-year, while retail trade increased 4.8 percent in June.
The central bank highlighted risks of domestic demand outpacing production capacity alongside external volatility from Middle East tensions and oil prices near $100 per barrel.
Reserve requirements and liquidity absorption measures remain active.
A symbolic cut against persistent headwinds
The marginal rate reduction offers political goodwill without relinquishing monetary tightness.
Persistent domestic demand and double-digit inflation expectations severely restrict further room for maneuver.
Lowering rates while underlying monthly price pressures reaccelerate risks unanchoring the 5 percent inflation target.