- Decision
- Maintain
- Rate change
- 0 bps
- refinancing rate
- 6.5%
The Management Board of the Central Bank of the Republic of Azerbaijan held the refinancing rate at 6.5% and the interest-rate corridor ceiling at 7.5%, while cutting the floor by 50 basis points to 5% effective 24 September 2026, with inflation within target and excess banking-sector liquidity supporting greater interbank activity. After 25-basis-point cuts in December 2025 and February 2026 lowered the refinancing rate from 7% to 6.5%, it was held through July. The lower floor is intended to encourage interbank transactions and reduce central bank participation in the money market, while the unchanged refinancing rate and ceiling are intended to stabilize inflation expectations. Annual inflation eased to 5.7% in August and remained within the 4±2% target range, with the medium-term forecast unchanged, while the structural liquidity surplus excluding required reserves reached AZN 6.3 billion. The central bank absorbed excess foreign currency supply, lifting its reserves to a record USD 15.3 billion, and may revise its 2026 current-account surplus forecast upward. Global geopolitical uncertainty continues to pose risks from higher energy and food prices and imported inflation. Further corridor decisions will depend on the inflation outlook, macroeconomic indicators, foreign exchange developments and banking-sector liquidity, with projections reviewed under multiple scenarios.
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.