- Decision
- Maintain
- Rate change
- 0 bps
- refinancing rate
- 6.5%
The Management Board of the Central Bank of the Republic of Azerbaijan left the refinancing rate at 6.50% and maintained the 5.50%–7.50% interest-rate corridor on 6 May 2026, judging that both headline inflation (5.6% y/y in March) and core inflation (5.5%) remain within the 4 ± 2 pp target band while external cost pressures and geopolitical tensions pose upside risks. After three 25 bp cuts since July 2025, the policy rate now stands 75 bp lower. Short-term interbank rates continue to trade near the policy rate—April’s average AZIR was 6.44%—as the central bank actively manages liquidity. FX supply has exceeded demand so far in 2026; resident deposit dollarisation fell to 28% and foreign-exchange reserves rose 10.2% to USD 12.7 bn, supported by a Q1 trade surplus of USD 1.4 bn. Higher global food prices, partner-country inflation and war-related disruptions to energy and shipping routes dominate the external risk set. The central bank said future corridor decisions will hinge on updated inflation and macroeconomic assessments and it is prepared to tighten policy if price growth risks breach the target; the next announcement is scheduled for 24 June 2026.
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.