Baku, Azerbaijan, April 23. The refinancing
rate has been kept unchanged at 7.25 percent, the lower limit of
the interest rate corridor at 6.25 percent, and the upper limit of
the interest rate corridor at 8.25 percent by the decision of the
Board of Directors (Board) of the Central Bank of the Republic of
Azerbaijan (CBA), Trend reports via the CBA.
The decision regarding the interest rate corridor was made based
on an analysis of actual and forecasted inflation compared to the
target range (4±2%), global economic and financial conditions,
domestic macroeconomic trends, and the transmission of monetary
policy decisions to the real sector.
Since the last meeting, annual inflation has remained within the
target range. As of March 2025, twelve-month inflation stood at 5.9
percent, which aligns with projections. During this period, annual
price increases were 6.5 percent for food, 2.8 percent for non-food
products, and 7.5 percent for services. Core inflation was recorded
at 4.5 percent.
External factors influencing inflation have shown increased
volatility in recent months. According to the International
Monetary Fund, the commodity price index declined by 2.7 percent on
a monthly basis in March 2025 but rose 2.6% year-over-year. The
weighted average annual inflation rate among Azerbaijan’s trading
partners was 9.6% in March, compared to the same month last year.
The nominal effective exchange rate of the manat, excluding the oil
and gas sector, appreciated by 1.8 percent year-over-year in
March.
Indicators from the external sector remain favorable. The data
obtained from the State Customs Committee shows that Azerbaijan
recorded a positive trade balance in the first quarter of 2025.
Forecasts suggest a surplus in the current account balance for the
full year.
Monetary policy tools are being applied in response to financial
market developments and changes in the liquidity position of the
banking system. In the short-term money market, average interest
rates remain within the CBA’s corridor. In addition to standing
facilities, one-week repo and reverse repo operations have been
regularly conducted this year. The average daily level of the 1D
AZIR index was 7.68 percent in the first ten days of April and 7.21
percent in the second ten days. A Treasury auction held on April
11, in which surplus funds from the single treasury account were
deposited in systemically important banks, boosted banking system
liquidity and slightly reduced the 1D AZIR index.
Changes in inflation risk balance since the last meeting have
been largely driven by external conditions. Expanding trade wars
and ongoing geopolitical tensions are increasing volatility in
global commodity prices. Reciprocal tariff hikes are not only
weakening global trade but also raising instability risks in
financial markets. On the domestic front, potential inflationary
pressures may arise from rising production costs and an excessive
increase in aggregate demand. Additionally, the influence of credit
activity on price stability remains a key consideration. Overall,
the contribution of internal factors to inflation forecasts for
2025–2026 is assessed to be minimal.
Overall, the current monetary policy remains focused on
containing inflation and anchoring inflation expectations. Under
the existing policy framework, the forecast for annual inflation in
2025 and 2026 remains within the target range of 4±2 percent.
Updated projections indicate annual inflation will hover around 5.3
percent this year and 4.3 percent next year.
Future decisions on the parameters of the interest rate corridor
will depend on the dynamics of actual and projected inflation,
along with internal and external risk factors. The Central Bank has
reiterated its commitment to using all available tools to ensure
price stability.
The next decision regarding the interest rate corridor
parameters is scheduled to be announced on June 11, 2025.
10:05
The refinancing rate has been kept unchanged at 7.25 percent,
the lower limit of the interest rate corridor at 6.25 percent, and
the upper limit of the interest rate corridor at 8.25 percent by
the decision of the Board of Directors (Board) of the Central Bank
of the Republic of Azerbaijan (CBA), Trend reports via the CBA.
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