In September, the CPI inflation in Kazakhstan has accelerated to 7.4% y/y, up from 7.1% y/y in August, and 6.9% y/y in July, the Statistics Agency has reported. Acceleration of inflation is driven by sharp depreciation of Kazakh national currency KZT on Feb 11. National Bank of Kazakhstan decided to stop supporting KZT which led to de facto devaluation of around 20%.

Prices for non-food products were the main drivers of inflation as they increased by 8.4% accelerating from 8.1% y/y seen in August. We assume that higher petrol prices were the main reason for the growth in this segment. Prices for food and services advanced by 7.4% y/y 6.5% y/y respectively. Growth in prices for services would be higher but the government imposed price control policy after devaluation of the national currency.

Since the beginning of the current year, the rate of inflation has reached 5.9%. In m/m terms, the CPI inflation has accelerated to 0.5% after seeing a growth of 0.4% m/m in August and a mere 0.1% in July. Generally, prices for food in September went up by 0.3% m/m. On the other hand, prices for non-food products increased by 0.5% m/m and for services – by 0.7% m/m driven by higher prices for motor transportation (higher by 3.2% m/m).

The government’s target for the inflation corridor remains unchanged at 6-8% y/y this year which might be rather difficult to achieve given decrease in industrial production and pressure put on KZT by weakening RUR. In 2013, inflation stood at 4.8% y/y.