BAKU, Azerbaijan, July 27. The National Bank of
Kazakhstan's latest decision to lower the base rate to 16.75%
marked a continuation of its course toward gradual monetary policy
easing. However, the pace of this process remains highly cautious.
While in June the regulator reduced the rate by 100 basis
points—from 18% to 17%—in July it limited the cut to just 25 basis
points. This slower pace of easing itself indicates that, despite
the improvement in the overall inflation picture, the National Bank
does not yet consider the risks to have been fully eliminated.


The basis for the July decision was the continuation of the
disinflation process. According to the National Bank, annual
inflation declined for the ninth consecutive month, reaching 10.3%
in June compared to 10.4% in May. For comparison, inflation reached
its peak of 12.9% in September 2025, after which the National Bank
raised the base rate to 18% in October. Food price growth slowed to
10.4%, while services inflation stood at 9%. At the same time,
non-food inflation remained at 11.7%. It was likely this
combination of declining overall inflation and the persistence of
inflation in certain segments that led the regulator to opt for
only a small rate cut.


It is noteworthy that the tone of the July statement was also
more cautious than a month earlier. While in the previous month the
regulator highlighted a noticeable slowdown in monthly inflation to
0.7% and a decline in household inflation expectations to around
12.7% in May, in July it once again drew attention to the remaining
risks. Household inflation expectations increased to 13.4% in June,
monthly inflation accelerated to 0.8% from 0.7% in May, and rising
gasoline prices, housing and utility services, and persistently
strong domestic demand were cited as additional sources of
pressure.


At the same time, most macroeconomic indicators continued to
improve. GDP growth accelerated from 3.7% in January–May to 4.1% in
the first half of the year. Growth in fixed capital investment
accelerated from 7% in the first five months to 9.6% in the first
half of the year, while retail trade growth increased from 3.4% to
4.8% over the course of a month. These indicators point to
continued strong business activity, but at the same time confirm
the National Bank's position that domestic demand remains
sufficiently strong and could once again intensify inflationary
pressure if interest rates are reduced too quickly.







Overall, the latest decisions indicate not so much a change in
priorities as a gradual normalization of policy following a period
of tightening. While in the autumn of 2025, when inflation reached
12.9%, the National Bank raised the base rate immediately to 18% in
order to return monetary conditions to restrictive territory, the
regulator is now moving toward cautious policy normalization.
However, the modest July reduction of 25 basis points shows that
the National Bank still views disinflation as a process requiring
further confirmation. As long as inflation remains more than twice
the medium-term target of 5%, while inflation expectations and
domestic demand remain elevated, the regulator will likely continue
to favor small and gradual adjustments, keeping monetary conditions
moderately tight.


An additional factor explaining the National Bank's caution
remains the external economic environment. In its statements, the
regulator has repeatedly pointed to the persistently high level of
uncertainty in global markets. Among the main risks it cites are
the conflict in the Middle East, which is keeping energy prices and
certain categories of food prices elevated, as well as persistent
inflationary pressures in the world's largest economies. For the
National Bank, this means it is necessary to preserve room for
maneuver. As long as high uncertainty persists in global markets,
reducing borrowing costs too quickly could increase pressure on the
tenge, accelerate imported inflation, and complicate the return of
price growth to the target level.