- Decision
- Maintain
- Rate change
- 0 bps
- refinancing rate
- 7.25%
The Central Bank of the Republic of Azerbaijan on 11 June 2025 left its refinancing rate at 7.25%, with the interest-rate corridor unchanged at 6.25%–8.25%, citing actual inflation that aligns with its forecast path and remains within the 4 ± 2 % target despite persistent external and domestic risks. The refinancing rate has been steady at 7.25% since at least January 2025, with no corridor adjustments over the past four meetings. Interbank conditions remain orderly: the one-day AZIR averaged 6.7 % in May and early June, staying inside the corridor as increased treasury deposits boosted banking-system liquidity, prompting the central bank to replace seven-day repos with seven-day deposit operations and intensify open-market absorption. April’s 12-month headline inflation was 6.3 %, with food prices up 7.6 %, non-food prices 2.7 %, and core inflation 4.8 %. External accounts are robust—foreign trade has been in surplus for the first four months and the current-account surplus is expected to persist through 2026—while the manat’s non-oil-gas nominal effective exchange rate was stable in May. Globally, the IMF’s commodity price index fell 4.6 % year-on-year in May and partner-country inflation stayed high at 9.6 %, amid volatile commodity and financial markets and a weaker dollar. The board noted that reduced external inflation uncertainty could open room to cut the refinancing rate at the 23 July 2025 decision, but stressed that future moves will hinge on incoming inflation data and risk assessments.
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.