Kazakhstan: Inflation decelerates for the first time in a year in August
September 1, 2016
In August, consumer prices rose 0.2% over the previous month, down from the 0.5% increase observed in July. August’s monthly increase was the softest in 13 months and mainly reflected that lower prices for food had compensated for higher prices in other categories, mainly clothing and transportation.
Inflation edged down from 17.7% in July to 17.6% in August. Inflation had begun to accelerate following the devaluation of the currency in August 2015—when it was allowed to free float—and reached an eight-year high in July. Inflation is now expected to continue falling since the currency has stabilized and as a base effect fades. Although inflation has remained well above the National Bank of Kazakhstan’s inflation target corridor of between 6.0% and 8.0%, the Monetary Authority has cut its key monetary policy rate by a cumulative 400 basis points this year. At its latest meeting on 15 August, the Bank decided to keep it on hold, stating that further cuts will depend on the current inflation level, inflation expectations and the exchange rate.
August inflation showed only a mild moderation but the trend suggests that inflation is returning to the high levels last seen at the height of the global financial crisis. Annual average inflation jumped from 13.1% in July to 14.3% in August, which is the highest level since March 2009.
Author: Ricardo Aceves, Senior Economist