BAKU, Azerbaijan, December 28. The monetary policy in 2025 will be aimed at ensuring price stability, which is the main mandate of the Central Bank of Azerbaijan, as well as stabilizing inflation within the set target, the statement of CBA on the main directions of the monetary policy for 2025 said, Trend reports.
Meanwhile, it is noted that reforms to improve the monetary policy framework will be continued.
“In accordance with the ‘Strategy of Socio-Economic Development of the Republic of Azerbaijan for 2022-2026,’ the goal of monetary policy for the next year will be to keep annual inflation at the level of 4±2 percent. As in previous years, the target for the next year will be the change in the consumer price index calculated by the State Statistics Committee over the last 12 months. According to the latest (October 2024) forecasts of the Central Bank, annual inflation is expected to be around 5.8 percent in 2025, which is in line with the target. The Central Bank will also regularly update its inflation forecasts based on a comprehensive analysis of inflationary factors. In addition to general inflation, the dynamics of core inflation will be constantly analyzed, as well as the assessment of inflation expectations will continue,” the information says.
The CBA emphasizes that price stability will continue to be subject to a number of external and domestic risks.
“Next year, external factors such as commodity price dynamics in the global market, inflationary processes, and economic activity in partner countries will continue to influence inflationary processes in the country. With the ongoing geopolitical tensions, the above external factors are expected to remain unstable. Among the internal risks to price stability are possible excessive expansion of aggregate demand, changes in tariffs for goods and services regulated by the state, as well as the growth of inflation expectations,” the information says.
The CBA predicts that the currency channel will continue to play a major role in the transmission mechanism of monetary policy in 2025.
“The nominal effective exchange rate of the manat will remain one of the key factors affecting imported inflation. According to the latest calculations based on the forecasts of international think tanks on bilateral exchange rates, the nominal effective exchange rate of the manat will continue to strengthen in 2025. Next year, the interest rate corridor of the Central Bank will remain one of the main instruments for influencing the monetary conditions in the economy. Decisions on the interest rate corridor will be made taking into account changes in the balance of inflation risks caused by external and internal factors, as well as updated macroeconomic forecasts. Similar to previous years, in 2025, the discussion of the interest rate corridor will be held at the meetings of the Board of the Central Bank in accordance with the predetermined schedule,” the CBA stresses.
The information notes that in 2025, the Central Bank will continue to focus on improving its analytical and forecasting capacities.
“The forecasting and policy analysis system will regularly improve the modeling apparatus based on best practices, expand the coverage, and deepen the content of research. To expand the alternative statistical database, cooperation with public organizations and private entities will continue,” the CBA remarks.
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