Kazakhstan Cuts Base Rate to 15.75% as Inflation Eases, Signals Likely Pause

A larger cut, followed by a warning on inflation

Kazakhstan's National Bank lowered its base rate from 16.25% to 15.75% on October 23, 2026, after annual inflation fell to 9.3% in September, its 12th consecutive monthly decline. The central bank nevertheless signaled that another rate change before the end of the year was unlikely.

The reduction of half a percentage point, or 50 basis points, puts the rate at the lower end of the 15.75% to 16% range anticipated by surveyed analysts. The Monetary Policy Committee kept its rate corridor at one percentage point on either side of the base rate, giving it a range of 14.75% to 16.75%.

The decision combines two messages for households and businesses: slower inflation has made some easing possible, but borrowing conditions will remain restrictive while price pressures persist. The bank is still aiming to bring inflation down to 5% in 2028.

September's inflation rate was 4.3 percentage points above that target. Food prices were rising more slowly, the tenge was strong and inflation expectations had improved, but services inflation remained unchanged and government spending continued to support demand.

The next scheduled decision is December 4 at noon Astana time. The bank said any further reduction would depend on sustained evidence that price pressures were easing, rather than a single favorable monthly reading.

Food prices led the improvement

Food inflation slowed from 9.5% to 8.5%, helped by cheaper fruit and vegetables and a slower increase in meat prices. That decline of one percentage point was larger than the improvement in nonfood goods, where annual inflation eased from 11.4% to 11%.

Fuel and lubricant prices were increasing more slowly, helping bring down nonfood inflation. Services inflation, however, stayed at 8.9%, with prices for services outside government regulation continuing to rise rapidly.

September's headline inflation rate fell from 9.8% in August to 9.3%. For consumers, that means the typical basket of goods and services was still more expensive than a year earlier, but the pace of the increase had slowed.

Monthly inflation remained at 0.6%, unchanged from August. After adjusting for regular seasonal patterns, such as harvest periods, the monthly rate declined from 0.9% to 0.7%. The median of the bank's seasonally adjusted core inflation estimates stayed at 0.7%.

Core inflation measures aim to reveal more persistent price movements by filtering out some temporary or unusually volatile changes. The unchanged core reading helps explain the bank's caution: improvements in food prices have yet to be matched by equally broad relief across the economy.

Expectations are falling, but remain elevated

Households' expectations for inflation over the next 12 months fell to 11.8% in September from 12.1% in August. People still expected prices to rise faster than the latest measured annual rate of 9.3%.

Professional market participants also lowered their forecasts. They expected inflation of 9.5% at the end of 2026, down from 10%, and 8.3% in 2027, down from 8.5%. Those are the forecasts of market professionals; the National Bank's stated policy goal remains 5% inflation in 2028.

Expectations matter because they can influence decisions made today. Workers anticipating higher living costs may seek larger pay increases, while businesses expecting higher expenses may raise their own prices. Falling expectations can help slow that process.

The bank therefore has reasons both to lower rates and to proceed carefully. Forecasts are moving in the desired direction, but households and market professionals still anticipate inflation well above the target.

The tenge helps contain imported costs

The National Bank linked the decline in inflation partly to favorable movements in the tenge. The currency had gained about 20% against the US dollar over a year and 11% since the outbreak of the Iran war.

A stronger tenge can reduce the local currency cost of goods purchased in dollars. For an importer paying an unchanged dollar price, fewer tenge are needed to settle the bill. That can help contain prices for imported products and supplies used by domestic businesses.

The currency has provided a buffer while global food and energy prices have risen. This helps explain how Kazakhstan has been able to lower its policy rate while some major central banks have moved in the opposite direction.

The tenge's strength also creates a point of vulnerability. Commodity prices and movements of investment money across borders can affect the exchange rate. A weaker currency would increase the local cost of imports, adding pressure at a time when domestic inflation is still elevated.

The new base rate stands 6.45 percentage points above September's annual inflation rate, using the simple difference between 15.75% and 9.3%. That gap illustrates how restrictive policy remains, although the inflation people expect over the coming year also matters for borrowing and saving decisions.

Growth and public spending keep demand strong

Kazakhstan's economy expanded by 4.2% in January through September 2026, according to operational data cited by the National Bank. Construction, manufacturing and transport were among the main drivers outside the resource sector.

Investment in fixed capital, including buildings, machinery and infrastructure, rose by 7%. Investment in the nonresource sector excluding budget funds increased by 25%, showing particularly strong activity beyond direct government financing.

Fiscal and quasi-fiscal stimulus continued to support domestic demand. Fiscal stimulus means support through government spending or taxation. Quasi-fiscal activity works through bodies such as public institutions or state enterprises rather than solely through the central budget.

Strong demand gives businesses customers and supports economic activity. When spending grows faster than the supply of goods and services, however, it can also give sellers more room to increase prices. That is one reason the bank remains concerned about inflation despite slower growth in consumer spending than a year earlier.

The central bank also pointed to measures helping restrain demand and price pressures: consumer credit regulation, liquidity management and higher reserve requirements. Reserve requirements determine how much money banks must hold rather than make freely available for lending. These measures operate alongside the base rate.

Global food, energy and interest rates add pressure

The United Nations Food and Agriculture Organization's food price index reached 136 points in September, up 1.5% from August and 5.8% from a year earlier. Higher cereal, sugar and vegetable oil prices drove the increase amid unfavorable weather and logistical constraints.

These global movements matter even while Kazakhstan's domestic food inflation is slowing. Imported food and ingredients can become more expensive, and higher international prices can influence the prices available to local producers and traders.

Tensions in the Middle East were also sustaining elevated global energy prices, according to the National Bank. Fuel costs affect more than motorists: they feed into freight, farming and the delivery of goods to shops.

The bank's statement described a tightening international monetary environment. It said the European Central Bank had raised rates for the second time in 2026 and the US Federal Reserve had increased rates for the first time since 2023. Russia's central bank had paused its easing cycle as price pressures strengthened.

Higher interest rates abroad can make investments in those markets more attractive and influence where money flows. For Kazakhstan, the bank identified tighter global financial conditions, higher inflation among trading partners and elevated food and energy prices as external risks to its inflation outlook.

Why utility bills could lift annual inflation

Kazakhstan's annual inflation rate could increase somewhat toward the end of 2026 because of changes in regulated utility tariffs a year earlier, the National Bank warned. A moratorium on tariff increases ran from October 2025 through March 2026, alongside a 14% reduction in utility tariffs in the final quarter of 2025.

Annual inflation compares today's prices with those in the same period a year earlier. When the earlier comparison period contains unusually low prices, the annual increase can become larger as that period enters the calculation. Economists call this a low base effect.

A simple example shows the arithmetic: a bill of 100 compared with an earlier bill of 100 shows no increase. The same bill of 100 compared with an earlier bill of 90 shows an increase of about 11%. The current bill is identical in both examples; the starting point changes the annual calculation.

The bank expects the earlier utility reductions to affect the annual comparison near the end of 2026. Fuel prices and regulated tariffs also remain domestic inflation risks in their own right, alongside public spending and elevated inflation expectations.

Markets expected easing, with less agreement on its size

An early October survey by the Association of Financiers of Kazakhstan found that 85% of experts expected a rate reduction at the October 23 meeting. Forecasts nevertheless varied over how much room the central bank had to act.

The association's Analytical Centre presented the regular survey results on October 9, 2026. The study examined financial market professionals' views on selected indicators for October, including those of representatives of banking, insurance and brokerage organisations and employees of analytical and treasury divisions. Most experts projected a base rate cut of 0.25 to 0.5 percentage points.

BCC Invest expected a quarter percentage point reduction to 16%. Alatau City Invest described a quarter point cut as the main expectation among surveyed analysts, while also considering a half point move. Freedom Finance Global forecast the eventual 15.75% rate, while SQIF Capital expected the bank to keep it at 16.25%.

The half point reduction therefore went further than many forecasts, while remaining within the anticipated range of cuts. It was the fourth consecutive reduction, bringing the rate down by 2.25 percentage points from 18% since June 2026.

The recent sequence and next scheduled decision are:

• June 2026: The base rate stood at 18% before the subsequent series of reductions.
• September 4, 2026: The preceding rate decision brought the base rate to 16.25%.
• October 23, 2026: The committee reduced the rate by half a percentage point to 15.75%.
• December 4, 2026: The next scheduled decision will be announced at noon Astana time.

The National Bank, which sets monetary policy, described its conditions for any further easing:

Considering the current balance of risks, the possibility of a change in the base rate by the end of 2026 remains low. The possibility of a further base rate reduction will depend on evidence of a sustained easing in price pressure. Further decisions will be made taking into account inflation trends, inflation expectations and changes in the balance of risks,

What changes for borrowers and savers

The base rate influences the cost of money across the economy, including what banks pay for funding and what they charge customers. A lower policy rate can gradually reduce borrowing costs, particularly for new lending and loans whose interest rates adjust under their contracts.

Banks set their own loan and deposit rates, so the timing and size of changes for customers will vary. Borrowers with fixed rates remain subject to their existing agreements, while savers may eventually see lower rates offered on new tenge deposits as banks adjust their funding costs.

The central bank has left the timing of any further cut open beyond its scheduled December meeting. Its guidance points toward a pause while it checks whether slower food inflation, a strong currency and improving expectations are producing a lasting decline in broader price pressures.

Key Points

• Kazakhstan cut its base rate from 16.25% to 15.75% on October 23, 2026.
• Annual inflation fell to 9.3% in September, its 12th consecutive monthly decline.
• Food inflation slowed to 8.5%, while services inflation stayed at 8.9%.
• Strong domestic demand and higher global food and energy prices remain inflation risks.
• Earlier utility tariff reductions could temporarily lift annual inflation near the end of 2026.
• The bank targets 5% inflation in 2028 and considers another rate change before the end of 2026 unlikely.
• The next scheduled decision is December 4 at noon Astana time.