Azerbaijan's Central Bank lowers discount rate

The Central Bank of Azerbaijan (CBA) on Wednesday lowered the discount rate from 8 percent to 7.75 percent, News.Az reports citing the CBA. 

According to the CBA, the top limit of the interest rate corridor was lowered from 9 percent to 8.75 percent and the lower limit from 6.5 percent to 6.25 percent.

This decision was made because actual and forecasted inflation is within the target corridor (4±2 percent), stabilization of inflation expectations, as well as the situation in the foreign exchange market. The annual inflation rate has declined since the last Monetary Policy Board meeting. Twelve-month inflation stood at 2.1 percent in 2023 and formed at the lower end of the target range (4±2 percent). A decrease in inflation was observed for all group components of the consumer basket. Annual food inflation amounted to 0.8 percent, non-food inflation was 2.7 percent, and inflation in the sphere of services was 3.7 percent. The dynamics of actual inflation also affected inflation expectations. 

The CBA notes that annual inflation declined due to the impact of external and domestic factors.

Weakening global economic activity, as well as the continued decline in global commodity, energy, and food prices, have limited the importation of inflation into the country. According to the World Bank, the commodity price index fell 18.9 percent year on year in December last year, including a 24 percent drop in energy prices. According to the UN Food and Agriculture Organization (FAO), the food price index declined by 10.1 percent year-on-year in December. 

The CBA stresses that further decisions on the parameters of the interest rate corridor will be made depending on changes in external and internal inflationary factors.

In decision-making, it will be taken into account the peculiarities of monetary policy in the country and processes in the financial markets, including the foreign exchange market. If the above risks are not realized, the possibility of step-by-step monetary policy easing during the rest of the year will be considered. 

News.Az 

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