BAKU, Azerbaijan, June 20. Russian Gazprombank expects the Central Bank of Azerbaijan (CBA) to raise the refinancing rate by 25 basis points to 9.25 percent at the upcoming board meeting on June 21, Deputy Head of Research, Chief CIS economist at Russian Gazprombank Gulnara Khaidarshina told Trend.
According to her, monetary policy tightening is expected to be suspended soon after that until the end of the year.
"There is a gradual slowdown in inflation, although it still exceeds the refinancing rate. Secondly, there is a stable, but still high level of dollarization of deposits of the population. Thirdly, the money supply is growing due to the stimulating fiscal policy. And finally, there is an increase in domestic demand," she said.
Given the slowdown in inflation, perhaps the Central Bank will change the tone of its statement, softening it. At the previous meeting in May, the CBA continued to tighten monetary policy, raising the rate by 25 basis points to 9 percent. Moreover, the Central Bank has expanded the possibilities of regulating lending activities and the attractiveness of deposits in manat, increasing the lower and upper limits of the interest rate corridor.
The CBA confirmed its commitment to anti-inflationary monetary policy in its statement. He noted that the expansion of aggregate demand due to the stimulating fiscal policy is one of the factors affecting inflation.
“The CBA also announced that it would consider suspending rate hikes and their subsequent reduction if inflation continues to slow down and forecasts improve," she added.
Khaidarshina thinks that given the slowdown in inflation and its approach to the level of the refinancing rate, the Central Bank is almost completing the cycle of raising rates and may make the last increase at the June meeting. After that, there may be prerequisites for suspending monetary tightening at subsequent meetings this year.
The Central Bank of Azerbaijan decided to raise the discount rate by 0.25 percentage points to 9 percent on May 3. The upper limit of the percentage corridor was raised from 9.75 percent to 10 percent, and the lower limit from 7 percent to 7.5 percent.