CBA: Inflation to be considered while setting key rate
The change of the discount rate of the Central Bank of Azerbaijan (CBA) in 2017 will depend on the dynamics of macroeconomic indicators, including inflation risks, the processes occurring in financial markets and liquidity position of the banking sector, the CBA told Trend.
As of late 2016, inflation in Azerbaijan amounted to 12.4 percent.
The US Federal Reserve System has earlier left its key rate at 0.5-0.75 percent. At the same time, it announced that within 2017, the rate will be raised to the average level of 1.375 percent.
The last time the Federal Reserve raised the base rate was on Dec. 14, 2016. Then it was raised from 0.25-0.5 percent to 0.5-0.75 percent. Prior to this, the base rate was raised in December 2015 from 0-0.25 percent, which was set in December 2008.
In Azerbaijan, the discount rate was raised from 9.5 to 15 percent in September 2016. The upper limit of the interest rate corridor was raised from 15 to 18 percent and the lower limit - from four to 12 percent.
Framework operations aimed to raise funds are now being conducted at the lower limit of the interest rate corridor, while operations to place funds are being carried out at the upper limit, according to the CBA.
“As for open market operations to raise funds, the interest rates on them vary between the lower limit of the interest rate corridor and the discount rate. These operations include deposit auctions and emission of short-term notes of the Central Bank. Open market operations on placement of funds are conducted at the interest rate ranging from 15 to 18 percent,” said the CBA.