- Decision
- Lower
- Rate change
- 25 bps
- refinancing rate
- 7%
The Management Board of the Central Bank of the Republic of Azerbaijan cut the refinancing rate by 25bp to 7.00% and lowered the interest-rate corridor to 6.00–8.00% at the 23 July 2025 decision, citing headline inflation that is tracking the forecast path and staying within the 4 ± 2 percent target band, a stable foreign-exchange market and supportive domestic and global conditions. This is the first move after the rate had been held at 7.25% in every meeting from January to June 2025. Short-term unsecured money-market rates (AZIR) have remained inside the new corridor, averaging 7.03% in June and 7.15% so far in July, with the central bank continuing to absorb excess liquidity through seven-day sterilisation operations to anchor AZIR near the policy rate. Twelve-month inflation eased to 6% in June, with food prices up 7.0%, services 7.2%, non-food goods 2.8% and core inflation at 4.8%; baseline forecasts put annual inflation at 5.7% in 2025 and 5.3% in 2026. FX supply continues to exceed demand, household deposit dollarisation is falling, and a USD 1.4 bn trade surplus in the first half of 2025 underpins expectations of current-account surpluses through 2026. IMF data show the global commodity price index down 0.6% y/y and food prices lower by 4.2%, with limited pass-through to domestic prices despite lingering external uncertainties. Future corridor decisions will depend on actual and projected inflation and the balance of external and domestic risks; the new rates take effect on 24 July, and the next policy announcement is due on 10 September.
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.