- Decision
- Maintain
- Rate change
- 0 bps
- refinancing rate
- 6.5%
The Management Board of the Central Bank of the Republic of Azerbaijan kept the refinancing rate unchanged at 6.5%, maintaining the interest-rate corridor at 5.5%–7.5%, citing inflation still within the 4 ± 2 % target range but highlighting heightened upside risks from regional geopolitical tensions and global commodity-price volatility. After three consecutive 25 bp cuts since July 2025, the last of which in February 2026 brought the policy rate to its current level, the central bank has moved to a wait-and-see stance. Overnight unsecured money-market rates continue to trade inside the corridor and close to the policy rate, with the AZIR index easing to an average 6.47 % in March as the bank relied chiefly on weekly open-market operations to offset liquidity swings. Twelve-month headline inflation measured 5.7 % in February, with food prices up 6.8 %, services 5.7 % and non-food goods 3.7 %; core inflation stood at 5.6 %. The foreign-exchange market remains stable: during January–February cash FX purchases exceeded sales by USD 51 m, resident household dollarisation fell to 27.7 %, and official reserves rose 1.2 % to USD 11.7 bn, supported by a USD 1.1 bn trade surplus and expectations of current-account surpluses through 2027. The central bank notes that supply disruptions and higher energy and logistics costs could feed through to domestic prices, and it pledges to deploy all available tools and adjust the corridor parameters should actual or projected inflation diverge from target.
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.