The National Bank of Kazakhstan reduced its key interest rate by 50 bp to 14.75% on January 23. 

This move, the second reduction introduced to the benchmark this year, was largely expected by the market. Kazakhstan's annual inflation increased by 9.5% y/y in January, down from the 9.8% y/y recorded in December. Inflation has been slowing in the country since last year. It fell below double digits in December.

The National Bank of Kazakhstan's macro and market overview released on February 19 projected that annual inflation will fall within the range of 7.5% to 9.5% in 2024.

The central bank indicated that further easing of monetary policy would be limited and suggested that the rate would be unlikely to change in upcoming monetary policy reviews. Additionally, the regulator revised upwards Kazakhstan's economic growth forecast for this year to a range of 3.5-4.5% from the previous estimate of 3.2-4.2%.

Regarding inflation forecasts for the coming years, the regulator identified potential risks stemming from possible new Western sanctions against Russia, one of Kazakhstan's major trading partners. These risks could impact the inflation outlook for Kazakhstan in the near future.

According to official statistics, prices for food products rose by 8.2% y/y in January, for non-food products by 8.6% y/y and for services by 12.3% y/y.

Food products have been the primary driver of inflation, accounting for 36.1% of the overall inflation rate. This marks a decrease from a peak of 55% observed in April-May 2022.

The contribution of non-food products to inflation has decreased from 32% to 26.8%.

Paid services account for 37% of inflation. In 2023, they constituted 20.2% of the total annual inflation rate.