According to the folks at the Conway Bulletin, “Kazakhstan’s Statistics Committee said on Tuesday
consumer prices rose by 2.5% in January-February.” Well, not exactly. The committee reported that consumer prices
in February were up 1.1% from January and up 2.5% from December. In any event, what is more meaningful is the
implied annual rate of inflation, since this is how inflation is usually expressed.
Assuming monthly compounding, one can derive this rate as (1.011)^12 - 1,
or 14%.
This approach tells us something about inflationary expectations. A more backward-looking method is to compare the February price level (roughly, the average price in Kazakhstan) to that of February 2015. By this approach, the National Bank estimates annual inflation last month as 15.2%. The annual change in January was 14.4%.
This approach tells us something about inflationary expectations. A more backward-looking method is to compare the February price level (roughly, the average price in Kazakhstan) to that of February 2015. By this approach, the National Bank estimates annual inflation last month as 15.2%. The annual change in January was 14.4%.
Monthly changes in prices mean little: Prices
are seasonal, and in any event one needs a longer trend in order to plan. But the new estimates
suggest that inflationary expectations in Kazakhstan are not likely to soon
subside. The annual rate of inflation has been above 12.8% since November, according to the National Bank.
Expectations of high inflation complicate the central bank’s attempts to bring inflation back below 8%. The National Bank forecasted 2016 inflation at 8% -- which, coincidentally enough, is the top of its target range. But for that prophecy to hold true, inflation for the rest of the year must average 6.8%, less than half the going rate. The problem is that the Bank still is not making a dent in expectations of inflation, even though it raised the key interest rate to an eye-popping 17%.
Expectations of high inflation complicate the central bank’s attempts to bring inflation back below 8%. The National Bank forecasted 2016 inflation at 8% -- which, coincidentally enough, is the top of its target range. But for that prophecy to hold true, inflation for the rest of the year must average 6.8%, less than half the going rate. The problem is that the Bank still is not making a dent in expectations of inflation, even though it raised the key interest rate to an eye-popping 17%.
There’s more. As folks continue to expect inflation, they will rid themselves of tenge, since they expect it to lose purchasing power over domestic goods. They’ll park their wealth in dollars instead. So the exchange rate of tenge for a dollar, now 345, may depreciate again. – Leon Taylor tayloralmaty@gmail.com
References
National Bank of Kazakhstan. Annual inflation rate. www.nationalbank.kz
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