- Decision
- Maintain
- Rate change
- 0 bps
- refinancing rate
- 7.25%
The Management Board of the Central Bank of the Republic of Azerbaijan on 22 January 2025 kept the refinancing rate at 7.25 percent together with an unchanged 6.25–8.25 percent interest-rate corridor, judging current and projected inflation to be securely inside the 4 ± 2 percent target band amid a stable global and domestic backdrop. The one-day AZIR interbank rate has eased to 6.39 percent in January after the central bank scaled back liquidity-absorbing note issuance six-fold during 2024, and average daily unsecured market turnover reached AZN 627 million in December. Twelve-month headline inflation was 4.9 percent in December, core inflation 4.4 percent, and the bank now sees inflation around 5.5 percent in 2025 before moderating to 3.8 percent in 2026. Externally, the 2024 trade surplus stood at USD 5.5 billion and foreign-exchange reserves rose to USD 11 billion, supported by a 9 percent nominal effective appreciation of the manat that cushioned imported inflation. The bank noted generally stable global commodity prices—up 4.3 percent last year per IMF data—while flagging geopolitical tensions and stronger domestic demand as potential upside risks. It signalled readiness to cut rates if inflationary pressures and expectations ease but pledged to react “adequately” should risks to the target materialise; the next rate decision will be announced on 12 March 2025.
Rate evolution
Over the period, the Central Bank of the Republic of Azerbaijan eased the policy rate by 75 basis points from 7.25% to 6.5%, with an initial cut, a pause through October 2025, further easing around year-end and in February 2026, and holds in the policy rate thereafter through September 2026. Early decisions reflected inflation staying on forecast and within the 4±2% target range, foreign exchange stability, favorable external balances and policy transmission, while uncertainty centered on global trade volatility, import prices, the nominal effective exchange rate and domestic cost pressures or excess demand, and the December and February cuts followed easing upside risks and a lower 2026 inflation forecast, though geopolitical tensions and trade uncertainty kept external risks elevated.
The Central Bank kept the interest rate corridor unchanged on June 24 and July 31, 2026, as inflation remained within the target range, and in July judged that an upward revision to the inflation forecast called for tighter policy while a significant excess of foreign exchange supply over demand supported softer policy, warranting unchanged parameters. It forecast inflation at 6.1% at end-2026, 6% in June 2027 and 5.8% at end-2027. On September 23, the Central Bank held the refinancing rate at 6.5% and the corridor ceiling at 7.5% but widened the corridor by cutting the floor by 0.5 percentage point to 5%, effective September 24, based on actual and forecast inflation, foreign exchange developments, banking sector liquidity and global monetary conditions. With annual inflation at 5.7% in August, 0.1 percentage point lower than in July and broadly in line with the baseline forecast, the medium-term target-band outlook remained unchanged, while future corridor decisions would reflect the inflation outlook, key macroeconomic indicators, foreign exchange developments and banking sector liquidity, with risks from geopolitical uncertainty, higher energy and food prices, pass-through from major trading partners and the nominal effective exchange rate of the manat.