- Decision
- Maintain
- Rate change
- 0 bps
- refinancing rate
- 7%
The Management Board of the Central Bank of the Republic of Azerbaijan on 22 October 2025 left the refinancing rate at 7.0% with the interest-rate corridor unchanged at 6–8%, judging that 12-month inflation of 5.7% in September was aligned with the 4 ± 2% target range amid broadly balanced external and domestic risks. After a 25 bp reduction in July that took the policy rate from 7.25% to 7.0%, the AZIR money-market rate has stayed near the policy midpoint—averaging 7.15% in July and 6.96% in September—helped by active unsecured trading and one-week open-market operations designed to smooth liquidity. Inflation is projected at 6.0% at end-2025 and 5.7% in 2026; core inflation was 4.9% while slower credit growth and a tempered 2026 state-budget stance are seen containing demand pressures. The foreign-exchange market remains in surplus as hard-currency supply has exceeded demand for seven straight months, resident deposit dollarisation has fallen to 29%, and the foreign-trade surplus reached USD1.8 bn in the first nine months, prompting a slight upward revision to the 2025 current-account surplus forecast. Persistent global uncertainty is fuelling swings in commodity prices, with the IMF’s commodity price index up 3.3 % y/y in September and its 2025 global inflation outlook steady at 4.2%. The central bank said future corridor decisions will hinge on actual inflation and evolving risks, with the next announcement due on 10 December 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.