Kazakhstan: Inflation jumps in September due to tenge devaluation
October 2, 2015
Consumer prices in Kazakhstan in September jumped 1.0% over the previous month, which came in well above the 0.3% rise increase observed in August. According to the national statistics office, September’s result reflected higher prices for all categories in the basket, in particular for fresh food.
Consumer prices are beginning to feel the impact of the devaluation of the tenge, as the National Bank of Kazakhstan decided, on 20 August, to abandon the official exchange rate corridor and instead allow the Kazakh currency to float freely. The NBK abandoned the currency band and switched to a free-floating exchange rate regime in order to pursue an inflation-targeting monetary policy
As a result of the monthly increase, inflation jumped from 3.8% in August—the lowest level in 16 years—to 4.4% in September. Under the new regime, the Central bank established an inflation target corridor of between 6.0% and 8.0% for the medium term.
Inflation is likely to continue rising in the coming months, mainly due higher prices from imported goods as a result of the devaluation of the national currency. However, as domestic demand is expected to weaken going forward, this should dampen inflationary pressures and bring inflation down the Central bank’s target sooner than later.
Author: Ricardo Aceves, Senior Economist