BAKU, Azerbaijan, October 31. Last week the Central Bank of Azerbaijan (CBA) adopted the decision to raise the discount rate by 0.25 percent, up to eight percent, Trend reports citing CBA.
According to the Central Bank, the upper limit of the interest corridor remained at the level of 9.25 percent, while the lower limit was raised by one percent up to five percent.
Commenting on the decision, CBA chairman of board Taleh Kazimov said that it was made in accordance with plans to improve the operational structure of monetary policy and taking into account the actual and projected inflation, the processes taking place in the global and domestic economic environment, as well as expectations. Inflationary pressure remains in Azerbaijan, as well as in the majority of countries.
According to the CBA's analysis, the actual inflation is influenced by inflationary processes in the main trade partners. Under growing inflationary pressure in recent months it was decided to tighten monetary policy in support of savings in national currency. In order to further strengthen the possibilities of liquidity management in the banking sector and to regulate credit activity by means of interest rates in the short-term money market it was considered reasonable to narrow the interest rate corridor. Due to the global developments, the CBA is forced to conduct tight monetary policy.
Moreover, the Central Bank forecasts slowdown in inflation in the country in 2023. According to the CBA, the inflation forecasts for the end of 2022 were raised. In the third quarter, actual inflation exceeded expectations, including due to the revision of prices and tariffs for services regulated by the state. But the CBA confirms its forecast that annual inflation in 2023 will be lower than in 2022.
Kazimov said that the bank is aimed at maximum reduction of inflation in the country. The change in discount rate in one direction or another has a real impact on inflation. When the corridor that CBA sets is reached, the discount rate will be changed in the direction of revitalizing the financial market, rather than containing it.
Last week the Central Bank of Azerbaijan also revealed its forecast on the current account surplus. According to the forecast, a high current account surplus is expected in 2023.
In addition, Azerbaijan is studying Turkish payment systems in the banking sector.