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Analysts suggest that the dollar exchange rate around 500 tenge has become the new norm.

Although inflation slowed down in November, inflationary risks continue to persist.
Аналитики считают, что курс доллара на уровне 500 тенге стал новой реальностью.

After a spike in October, inflation slowed down again in November, reaching 8.4% year-on-year, while the monthly rate remained at 0.9%, reports inbusiness.kz citing the analytical center Halyk Finance.

"The primary reason for this slowdown was the decrease in the rate of price growth for paid services, while the prices for food and non-food items continue to rise. There are significant inflationary risks related to withdrawals from the National Fund and the weakening of the tenge. In response to this, as well as the downgrade of the inflation forecast for next year, the National Bank increased the base rate to 15.25% on November 29. Inflation is expected to range from 6.5% to 8.5%, exceeding previous estimates by one percentage point. Considering all balancing risks, we maintain our forecast for annual inflation at 8.5% by the end of 2024," the statement said.

Taking into account the acceleration in October, the consumer inflation rate in November slowed again to 8.4% year-on-year (from 8.5% in October). The key reason for the decline in inflation rates was the slowdown in price growth for paid services, which dropped to 13.3% year-on-year (from 14.3% in October), while food inflation accelerated to 5.4% year-on-year (from 4.9% in October), and non-food prices increased by 8% year-on-year (from 7.8% in October). Despite some acceleration in certain components, the easing of price pressure from paid services allowed the overall price dynamics to return to a downward trajectory.

Figure 1. Consumer Inflation Rates

Source: BNS

The main contribution to the inflation level continues to come from paid services, which increased by 13.3% year-on-year – their weight dominates the overall inflation figure, contributing 3.73 percentage points. Housing and utility services rose by 13.9% over the year, contributing 1.8 percentage points to inflation. In November 2024, compared to November of the previous year, electricity prices increased by 21.7%, contributing 0.5 percentage points to annual inflation. The contributions of food and non-food items to inflation were 2.29 percentage points and 2.41 percentage points, respectively.

Despite high foreign currency inflows from the National Fund, the depreciation of the exchange rate has intensified. The average USDKZT exchange rate in November was 494.9 tenge per dollar, compared to an average of 442 tenge per dollar in May of this year and an average of 449 in the first half of this year.

"The dollar to tenge exchange rate around 500 appears to be the new reality at this moment. Such a significant weakening of the exchange rate, combined with the observed rise in global food prices, may exert high pressure on inflation in the near future. Nevertheless, we maintain our inflation forecast for the end of the year at 8.5% year-on-year, partly due to the recent actions of the monetary regulator regarding the base rate," analysts note.