- Decision
- Maintain
- Rate change
- 0 bps
- refinancing rate
- 6.5%
The Central Bank of the Republic of Azerbaijan held its refinancing rate at 6.5%, citing inflation’s alignment with its target range and baseline forecast, following 25-basis-point cuts to 6.75% in December 2025 and to the current level in February 2026. It retained the interest rate corridor’s floor at 5% and ceiling at 7.5%, and continued to rely primarily on seven-day deposit operations to manage liquidity. Annual inflation stood at 5.5% in September 2026, within the 4±2% target range. The central bank projects inflation at 5.9% at the end of 2026 and in 2027, conditional on unchanged state-regulated prices and tariffs, with the forecast revised slightly lower for 2026 and higher for 2027. Excess banking-sector liquidity contributed to a slight decline in unsecured money-market rates. Foreign currency supply significantly exceeded demand, prompting central bank purchases to absorb the surplus. Global geopolitical uncertainty and potential increases in energy and food prices remained the main inflation risks through their transmission from trading partners, while domestic demand was not expected to significantly intensify price pressures. Further corridor decisions will depend on inflation forecasts, key macroeconomic indicators and foreign exchange market developments, with the next decision announcement scheduled for 23 December 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 thereafter through October 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. 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.
On October 29, the Central Bank held the refinancing rate at 6.5%, the corridor floor at 5% and the ceiling at 7.5%, taking into account headline and core inflation, inflation expectations and the balance of risks, alongside foreign exchange developments, banking sector liquidity and global monetary conditions. Annual inflation slowed to 5.5% in September, within the target range and in line with the baseline forecast, while the October forecasts put inflation at 5.9% at end-2026 and in 2027, with external risks still centered on geopolitical uncertainty, higher energy and food prices and pass-through from major trading partners, partly depending on the manat’s nominal effective exchange rate.