- Decision
- Maintain
- Rate change
- 0 bps
- refinancing rate
- 7%
The Management Board of the Central Bank of the Republic of Azerbaijan on 10 September 2025 left the refinancing rate at 7.00 percent, with the interest-rate corridor unchanged at 6.00–8.00 percent, citing actual inflation broadly aligned with its 4 ± 2 percent target range, stable foreign-exchange conditions and a balanced inflation-risk profile despite lingering global uncertainties. After a 25 bp rate cut in July that took the policy rate to the current level from 7.25 percent, unsecured money-market rates have stayed within the corridor and the AZIR index has eased to an average 6.98 percent so far in September, helped by the central bank’s one-week liquidity-absorbing operations and higher banking-sector liquidity linked to treasury deposit auctions. Twelve-month headline inflation slowed to 5.0 percent in July, with food prices up 6.2 percent, services 5.6 percent and non-food goods 2.1 percent, while core inflation was 4.6 percent. On the external side, a favourable backdrop persists: FX market supply exceeds demand, resident household dollarisation fell 1.5 ppt to 29.3 percent in August, and the current-account surplus reached USD 2.3 bn (6.3 percent of GDP) in the first half of 2025 alongside a USD 1.6 bn trade surplus over seven months. Globally, IMF data show annual declines of 0.7 percent in the commodity price index and 3.3 percent in food prices as of July, and the Fund has trimmed its 2025 global inflation forecast. Future corridor decisions will hinge on actual inflation, October-update forecasts and the evolution of external and domestic risks, including the path of public spending, with the next policy announcement scheduled for 22 October 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.