- Decision
- Maintain
- Rate change
- 0 bps
- refinancing rate
- 6.5%
The Board of Directors of the Central Bank of the Republic of Azerbaijan left all parameters of the interest rate corridor unchanged on June 24, 2026, citing the stabilization of actual and forecast inflation within the target range alongside the geopolitical situation, trends in global financial markets and the domestic macroeconomic environment. The Central Bank of Azerbaijan said short-term unsecured money market rates continued to form within the corridor close to the discount rate, with the average daily AZIR at 6.43-6.44% since end-March 2026, and that in conditions of excess liquidity it has mainly used 7-day deposit operations, which accounted for 88.7% of the sterilization portfolio for open market operations at end-May. Annual inflation was 5.6% in May 2026 and core inflation was also 5.6%, while the dollarization of resident individuals’ deposits fell by 2.8 percentage points over the last 12 months to 27%. In the foreign exchange market, supply exceeded demand in the first five months of 2026, prompting the central bank to conduct a buying intervention as banks’ demand at currency auctions fell, and foreign exchange reserves rose by USD1.2 billion, or 10.4%, to USD12.7 billion; customs data also showed a USD7.2 billion trade surplus in January-May 2026, and the central bank expects the current account surplus forecast for end-2026 to improve further. It said external inflation risks have increased as world food and fertilizer prices, transport and logistics costs, inflation imports from trading partners and slower nominal effective exchange rate appreciation add to cost pressures, although the likelihood of excessive aggregate demand expansion domestically is not high under current fiscal and monetary policies. The central bank said further decisions on the corridor will depend on the inflation forecast, macroeconomic dynamics, several scenarios for the global outlook, and banking sector liquidity and its direct and indirect effects.
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.