Kazakhstan holds rates, indicates room for cuts

Kazakhstan’s central bank (NBK) left the base rate unchanged at 18.00% today, in line with consensus and our expectations. The most noticeable change versus the previous decision is in forward guidance, with the NBK now stating that "...provided that current trends persist and no new shocks arise, the National Bank will be ready to consider the possibility of reducing the base rate in its subsequent decisions."

This sounds more dovish compared to the March signal: "Under current conditions, the space for monetary policy easing has not yet developed," – and raises the question of whether a cut is likely as early as the next meeting on 5 June. A more nuanced look into the commentary and the context, in our view, shows that the narrative is simply back to the conditional easing throughout the second half of 2026 presented at the beginning of this year.

At first glance, the April statement contains several dovish signals to support the new signal:

• Slower CPI to 11.0% year-on-year as of March, despite the recent VAT rate hike
• Deceleration of GDP growth to 3.0% YoY in 1Q26 after a 6.5% increase in FY25
• Softer domestic demand amid more restrained credit growth

However, the granular assessment remains risk‑focused and arguably more explicit than in March:

• The slowdown in GDP is mainly attributed to the oil sector; 1Q26 oil production was reported to be down 20% YoY, while non-oil sectors were described as resilient.
• Households' inflation expectations worsened from an already elevated 13.7% to an even higher 14.6% despite a slowdown in reported CPI.
• The success in disinflation is partly attributed to the stronger exchange rate, as the tenge has gained 7% vs the US dollar since the outbreak of the Iran war, as Brent jumped nearly 50%. In our view, the near-term prospects for KZT remain favourable, but the long-term sustainability of the appreciation trend requires further confirmation.
• A moratorium on utility and fuel price increases was more explicitly identified as a temporary disinflationary factor, as a 'resumption of regulated price and tariff reforms' was mentioned.
• Pro-inflationary risks coming from the fiscal and quasi‑fiscal stimulus were also more clearly articulated through 'intensification of the quasi-fiscal impulse in the second half of the year'.
• External risks are framed more directly as inflationary, with the escalation in the Middle East cited as a source of higher global prices for energy, food and fertilisers, increasing imported inflation risks for Kazakhstan – in line with our earlier assessment.