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Annual inflation continued to slow in August. Annual inflation declined from 10.2% to 9.8% (YoY), while monthly inflation remained unchanged at 0.6% (MoM). Core inflation also eased, from 11.3% to 10.7% (YoY), but remained above headline inflation, indicating a moderation in underlying inflationary pressures.
Households’ inflation expectations remain elevated. Twelve-month-ahead expectations remained unchanged at 12.1%, their lowest level since February 2022, while long-term expectations over a five-year horizon increased from 13.0% to 13.7%. At the same time, perceived inflation declined markedly from 11.4% to 9.9%, nearly converging with actual inflation.
The National Bank continued its cautious monetary policy easing. On September 4, the base rate was cut from 16.75% to 16.25%. At the current inflation rate, the real interest rate stands at 5.9%, while the National Bank of Kazakhstan continues to characterize monetary conditions as moderately tight. Professional market participants expect the base rate to reach 16.0% by the end of 2026.
The tenge strengthened against major currencies. The average USD/KZT exchange rate declined to KZT 464.55 per U.S. dollar in August, with the appreciation continuing into September. The strengthening against the Russian ruble was more pronounced: since July 1, the RUB/KZT exchange rate has fallen by 14.1%. At the same time, foreign currency supply by the National Bank in the domestic FX market declined.
External inflationary factors remain mixed. Inflation accelerated in Russia, the euro area, and China, while the FAO Food Price Index rose by 1.9% (MoM) in August. At the same time, the appreciation of the tenge lowers the cost of imported goods in local currency terms and partly limits the pass-through of external price pressures to domestic inflation.
AERC expects inflation to remain in single digits through the end of the year. Monthly inflation is forecast at 0.66% (MoM) in September, while annual inflation is expected to slow to 9.33% (YoY). The forecast was revised downward following lower-than-expected inflation in August. However, no significant further slowdown is expected through year-end. By December, AERC forecasts annual inflation at 9.27%.
Credit activity remains resilient, while new lending is shifting toward businesses. The banking sector’s total loan portfolio increased by 14.6% (YoY), with household loans still accounting for the largest share of the portfolio. At the same time, in January-July 2026, new lending to businesses increased by 20.1% (YoY), while new lending to households declined by 3.3% (YoY), pointing to stronger momentum in business lending.
Read more in the Monetary Snapshot.
