BAKU, Azerbaijan, June 11. The refinancing rate in Azerbaijan is holding steady at 7.25 percent, with the lower limit of the interest rate corridor pegged at 6.25 percent and the upper limit at 8.25 percent, as per the decision made by the Management Board of the Central Bank of Azerbaijan (CBA), Trend reports via the CBA.
The decision was made taking into account the compliance of the actual inflation with the forecast trajectory, the comparison of the forecasted inflation with the target level (4±2 percent), the possible influence of the latest global economic processes, the internal macroeconomic state, and also the transmission of the effects of monetary policy decisions.
Annual inflation moves in accordance with the predicted trajectory. In April 2025, annual inflation was 6.3 percent, and monthly inflation was 0.3 percent. The annual price increase for food goods and services was 7.6 percent, and for non-food goods - 2.7 percent. Annual base inflation was 4.8 percent.
In recent months, there is high uncertainty regarding external factors influencing inflation. According to the International Monetary Fund, in April 2025, the commodity price index decreased by 1 percent compared to the previous month and by 4.6 percent in annual terms. The weighted average annual inflation of trading partners in April of this year was 9.6 percent compared to the same month last year. The nominal effective rate of the manat in the non-oil and gas sector in May 2025 remained stable compared to May of the previous year.
Indicators of the foreign economic activity remain favorable. According to the State Customs Committee of Azerbaijan, a positive balance of the foreign trade balance was recorded in the four months of 2025. The forecast of the current account surplus of the balance of payments at the end of 2025 and 2026 remains unchanged.
Monetary and credit policy instruments are applied taking into account the processes taking place in the financial markets and changes in the liquidity position of the banking system. In the short-term money market, the average interest rates move within the interest rate corridor of the CBA. The average daily level of the AZIR (Azerbaijan Interbank Rate) index in May and June was 6.7 percent.
The CBA, taking into account the analysis of processes on the interbank money market and advanced international experience, in close cooperation with the experts of the European Bank of Reconstruction and Development, developed and approved new, more advanced rules for calculating the AZIR index.
Starting in April, deposit auctions conducted by the Ministry of Finance with the purpose of placing free balances of a single treasury account in commercial banks contributed to the growth of liquidity in the banking sector and had a lowering effect on the AZIR index. In many months of the second half of last year, the growth of the government account balance increased the short-term interest rates.
In this situation, the CBA intensified open market operations, and a significant part of the increased liquidity was sterilized with one-week operations, which are becoming the main tool of the CBA. In order to increase the effectiveness of sterilization-oriented open market operations, changes were made to the operational framework of monetary policy, and the seven-day repo operation was replaced with a seven-day deposit operation.
Activity in the money market remains high. In the five months of 2025, the volume of transactions in the unsecured market increased by 1.6 times and the number by 1.8 times compared to the corresponding period of last year.
Since the last meeting, changes in the balance of inflation risks have been mainly related to the external environment. Processes in global trade are increasing fluctuations in commodity and financial markets. In this environment, external risk factors include rising inflation in key trading partner countries, a decline in the dollar index, and a strengthening of the nominal effective exchange rate at a low rate. Internal risk factors that could increase inflation include both rising costs and an excessive increase in aggregate demand.
In addition, the possible impact of credit activity on aggregate demand and the price level is constantly under control. Overall, the contribution of internal factors to the inflation forecasts for 2025–2026 is assessed as low. According to the baseline scenario, the forecast remains unchanged: annual inflation in 2025 and 2026 will be within the target range.
In general, the current monetary policy is aimed at maintaining inflation within the target range and stabilizing inflation expectations. Reducing uncertainty in the external inflation environment may create conditions for reducing the key rate at the next meeting.
Decisions on the interest rate corridor parameters will be made taking into account actual and projected inflation, as well as the dynamics of external and internal risk factors. The CBA will continue to use all the tools at its disposal to ensure price stability.
Information on the next decision regarding the interest rate corridor parameters will be made announced on July 23, 2025, and a press conference will be held in connection with this.
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