- Decision
- Maintain
- Rate change
- 0 bps
- refinancing rate
- 6.5%
The Central Bank of Azerbaijan held the refinancing rate at 6.5% and the interest-rate corridor at 5.5%-7.5%, balancing an upward inflation forecast that warrants tighter policy against excess foreign-exchange supply that supports a softer stance. This followed three 25-basis-point cuts from 7.25% in July and December 2025 and February 2026. Short-term unsecured money-market rates remained within the corridor, with AZIR averaging 6.39% in the latest part of July, while the central bank continued to manage surplus liquidity mainly through seven-day deposit operations. Annual inflation rose to 5.8% in June but remained within the 4%±2 percentage-point target band, and the central bank projected 6.1% at end-2026 and 5.8% at end-2027, with domestic demand unlikely to generate inflationary pressure under current fiscal and monetary policies. Foreign-exchange supply significantly exceeded demand, prompting purchase-oriented intervention and lifting reserves to USD 13.8 billion, while the current-account surplus forecasts for 2026 and 2027 were revised upward. The central bank cited risks from geopolitical uncertainty, higher global energy and food prices and imported inflation, and said future corridor decisions would consider the inflation outlook, macroeconomic indicators, foreign-exchange market conditions, banking-sector liquidity and pressures for manat appreciation.
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.