Kazakhstan raises interest rate to record 18%: inflation is higher than in Ukraine

On Friday, the National Bank of Kazakhstan announced that it would raise its prime rate by 150 points to 18% per annum (from 16.5%). As Bloomberg points out, the central bank's decision came as a surprise to economists – none of the analysts surveyed expected such a drastic move.

The record rate hike is due to the acceleration of inflation, which in September accelerated to 12.9%.

The central bank's website indicates that the price increase covered all major categories: food went up by 12.7%, services by 15.3%, and non-food products by 10.8%.

Inflation is also driven by overheating of the economy: in January-August 2025, it grew by 6.5%, up from 3.7% last year. There are signs that demand is exceeding supply capacity.

"Inflationary risks are formed mainly by internal factors and are primarily driven by sustained high domestic demand, the manifestation of secondary effects associated with the implementation of tariff reform and the liberalization of the fuel and lubricants market, as well as the pro-inflationary impact of tax reform, including VAT," the central bank said in a release.

The inflation rate is already worrying the leadership of Kazakhstan.

President Kassym-Jomart Tokayev last month called rising prices the country's "main problem," and Prime Minister Olzhas Bektenov in September urged ministries to work with the central bank to slow inflation below 11% by the end of the year .

• Raising interest rates is the main tool central banks use to fight inflation. When the prime rate rises, loans become more expensive and deposit rates rise at the same time. It becomes more profitable to save, and households and businesses cut back on demand, which restrains further price increases.
• In Ukraine, the National Bank has kept the key policy rate at 15.5% since March . During this time, inflation has passed its peak (15.9% in May) and as of September slowed to 11.9% .