BAKU, Azerbaijan, March 18
By Zeyni Jafarov - Trend:
The Central Bank of Azerbaijan (CBA) will decide to suspend the cycle of easing monetary policy and maintain the refinancing rate at 6.25 percent following the upcoming meeting, Gulnara Haydarshina, Deputy Head of the Market Analysis Department of Gazprombank, told Trend.
According to Haydarshina, the main arguments in favor of such a decision can be considered fiscal incentives that create soft monetary conditions and inflation within the target corridor of the CBA.
She noted that to ensure a speedy economic recovery, the budget in 2021 will be an incentive and its deficit will expand to 4.1 percent of GDP.
“At the same time, fiscal incentives will have an increasing impact on the monetary base. This is evidenced by the observed growth of the liquidity surplus in the banking system. In order to maintain macroeconomic stability from the beginning of 2021, the Central Bank expanded the set of tools for sterilizing excess liquidity. Besides the 28-day notes, it was decided to hold auctions for 84-, 168- and 252-day notes,” said Gazprombank representative.
“In February the pro-inflationary pressure in the economy increased, which is typical for most of the CIS countries. Consumer price growth accelerated to 4.2 percent and passed the middle of the central bank's target corridor. At the same time, inflation is restrained by the stable exchange rate of the national currency, maintained at 1.7 AZN / USD, and the weakening of domestic demand amid the COVID-19 pandemic. The growth of inflation could also be facilitated by the acceleration of the rise in prices in the countries - key trade partners of Azerbaijan,” Haydarshina said.
“Taking into account the indicated factors, the Central Bank of Azerbaijan can complete the cycle of reducing the refinancing rate and keep it at 6.25 percent. At the same time, in the context of increasing pro-inflationary risks, we do not exclude a rate increase,” she added.
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