- Decision
- Maintain
- Rate change
- 0 bps
- refinancing rate
- 7.25%
The Management Board of the Central Bank of the Republic of Azerbaijan kept the refinancing rate at 7.25%, with the corridor floor and ceiling unchanged at 6.25% and 8.25%, citing actual and projected inflation within the 4 ± 2 percent target band and a broadly balanced risk profile amid stable global and domestic conditions. After also holding the rate at 7.25 percent in January, the central bank noted that 12-month headline inflation edged up to 5.4 percent in January, while core inflation was 4.3 percent, both still inside target; it continues to expect inflation to stay within the band through 2026. Interbank rates remain inside the corridor and have fallen 0.6–0.2 pp since December as lower government account balances eased banking-system liquidity; the operational framework was tweaked in February, shifting standing facilities to overnight tenors and scrapping minimum-bid requirements in note auctions. Externally, a 9 percent 2024 appreciation of the manat’s non-oil-gas NEER was followed by a 1.5 percent dip in the first two months of 2025, while the 2024 current-account surplus reached USD 4.7 bn (6.3 % of GDP) and January’s trade surplus rose 40.5 % y/y to USD 1 bn. The Board warns that commodity-price volatility linked to geopolitical tensions and domestic demand pressures could lift prices but pledges to “employ all available tools” to safeguard price stability, adding that rate cuts will be considered if actual and expected inflation recedes; the next decision will be announced on 23 April 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.