The Board of the Central Bank of Azerbaijan (CBA) has decided to keep the key interest rate at 6.5%.
“Operative Information Center-OMM” reports this with reference to the CBA.
According to the information, the lower limit of the interest rate corridor was reduced by 0.5 percentage points to 5%, while the upper limit remained at 7.5%.
“When making the decision on the parameters of the interest rate corridor, the dynamics of actual and projected inflation, developments in the foreign exchange market, changes in the liquidity position of the banking sector, as well as recent trends observed in the global monetary environment were taken into account.
The reduction of the lower limit of the interest rate corridor is aimed at promoting trading in the interbank money market amid excess liquidity in the banking sector. The widening of the corridor is expected to encourage banks to conduct more active transactions among themselves by reducing the CBA’s level of participation in the money market. Keeping the upper limit of the corridor and the key interest rate unchanged will contribute to stabilizing inflation expectations.
Since the previous meeting, no significant change has been observed in the balance of inflation risks. Against the backdrop of global geopolitical uncertainty, the risk of higher energy and food prices, as well as the pass-through of these increases to domestic prices through major trading partners, remains significant. Alongside other factors, the scale of this pass-through will depend on the dynamics of the manat’s nominal effective exchange rate. In the coming period, the likelihood of changes to the CBA’s inflation forecasts will depend mainly on the extent to which these risks materialize. Under the current fiscal and monetary policy conditions, domestic demand is not expected to increase inflationary pressures.
During the remainder of the current year, decisions on the interest rate corridor will also be made taking into account the inflation outlook, the dynamics of key macroeconomic indicators, developments in the foreign exchange market and changes in liquidity in the banking sector. Given uncertainties in the global environment and the intensity of their transmission to the domestic economy, forecasts for macroeconomic indicators will continue to be reviewed under several scenarios,” the CBA said.
