Kazakhstan's central bank may finally have room to start cutting interest rates. Annual inflation slowed to 9.3% in September 2026, down from 9.8% the previous month, while the base rate remains elevated at 15.75%. That gap between still-high borrowing costs and cooling price pressures is the classic setup for a policy shift.
Halyk Finance, the investment arm of Halyk Bank, expects the central bank to move gradually. It forecasts the base rate to edge down to 15.5% by the end of 2026 and to around 14% by the end of 2027, assuming inflation and consumers' expectations for future price rises keep easing. The firm also sees 2027 inflation settling between 8% and 9%, helped by tight policy and slower growth in consumer lending.
Why the pace of cuts matters
Central banks in emerging markets often move cautiously when inflation is still well above target. Kazakhstan's inflation rate of 9.3% is more than double the central bank's medium-term target, so even a cut to 15.5% would leave policy firmly restrictive. The monthly data supports the easing narrative: prices rose 0.6% in September, matching August's pace, and the annual rate has now declined for several months.
But Halyk Finance flagged risks that could push prices back up. One is the currency. The tenge has been trading around 462 per US dollar, and the firm expects it to weaken to about 490 by year-end if both the policy rate and oil prices fall. Kazakhstan is a major oil exporter, so lower crude prices tend to weigh on the currency and on government revenues.
A weaker tenge can show up directly in store prices. When the local currency loses value, imported goods become more expensive in tenge terms, which can keep inflation "sticky" even as the headline number improves. That's why rate-cut cycles in such economies often proceed slowly: a sliding currency can reheat inflation expectations, limiting how quickly policymakers can ease.
What it means for investors
For everyday investors, the key takeaway is the trade-off between lower rates and a weaker currency. If the central bank cuts as Halyk expects, holding tenge-denominated savings becomes less attractive for some investors, which can reduce support for the currency. That dynamic is already visible in the forecast: a 462-to-490 slide would represent a depreciation of roughly 6%.
The broader economic picture is mixed. Halyk forecasts the economy, which is heavily reliant on oil and metals, to grow about 4.8% in 2026 and between 4.5% and 4.8% in 2027. That's decent growth, but it's not enough to offset the currency risk. For investors with exposure to Kazakhstan, the path of the tenge is as important as the direction of interest rates.
Central banks in other emerging markets are facing similar dilemmas. In Japan, for instance, trend inflation is running hot, which could push the Bank of Japan toward further hikes. In Europe, the euro slipped to $1.12 as investors weighed central bank decisions and political uncertainty. And in Australia, big-ticket spending has weakened as inflation expectations rise, a reminder that consumer behavior often reacts to price pressures before official data turns.
The bottom line
Kazakhstan's central bank has a credible path to lower rates, but it's a narrow one. Inflation is cooling, yet it remains high, and the currency is a wildcard. If the tenge weakens too much, it could force policymakers to pause or even reverse course. For investors, the lesson is to watch both the inflation data and the exchange rate, because in emerging markets, the two are often two sides of the same coin.
Halyk's forecast is just one scenario, and central banks often surprise. But the direction is clear: after a long period of high rates, Kazakhstan is moving toward a slow, careful easing cycle—provided inflation and the tenge cooperate.
