BAKU, Azerbaijan, September 10. The refinancing rate was maintained at a steady seven percent, aligning with the lower threshold of the interest rate corridor set at six percent, while the upper threshold remains at eight percent, as determined by the Management Board of the Central Bank of Azerbaijan (CBA), Trend reports via the CBA.
The decision was made taking into account the compliance of actual inflation with the forecast trajectory and its comparison with the target (4±2 percent), recent global economic processes, the domestic macroeconomic environment, the ongoing stability in the foreign exchange market, as well as the transmission mechanism of monetary policy decisions.
According to the CBA, annual inflation is currently moving close to the forecast trajectory.
In July 2025, 12-month inflation was five percent. Annual price increases were 6.2 percent for food products, alcoholic beverages, and tobacco products; 5.6 percent for paid services; and 2.1 percent for non-food products. Annual core inflation was 4.6 percent.
Uncertainties still remain in the international environment; however, their increasing impact on domestic inflation has been modest in recent months. According to the International Monetary Fund (IMF), in July 2025, the commodity price index decreased by 0.7 percent annually, including the food price index by 3.3 percent. The IMF revised its global inflation forecast for 2025 downward in July, while keeping its forecast for 2026 unchanged.
In the past period of the current year, the overall supply in the foreign exchange market exceeded demand, covering both cash and non-cash segments. The dollarization of resident individuals' deposits decreased by 1.5 percentage points over the past 12 months to 29.3 percent in August 2025, indicating optimistic expectations regarding the exchange rate.
The external sector indicators, which are the main factor of balance in the foreign exchange market, remain favorable. According to preliminary figures, a positive balance of $2.3 billion, or 6.3 percent of GDP, was recorded in the current account balance for six months.
According to the State Customs Committee, the positive balance of foreign trade balance in the seven months of 2025 was $1.6 billion. The CBA's forecast that the current account of the balance of payments will be in surplus at the end of 2025 and 2026 remains unchanged.
Monetary policy instruments are applied taking into account the processes taking place in financial markets and changes in the liquidity position of the banking system. Since the last meeting, interest rates in the unsecured money market have moved within the CBA's interest rate corridor, and the difference between the AZIR index and the refinancing rate has decreased to a historical minimum. The average daily level of the AZIR index was 7.15 percent in July, 6.97 percent in August, and 6.98 percent in the last period of September.
Since the last meeting, along with the AZIR index, there have been decreases in the yield curve and the profitability of the CBA's notes. At the same time, decreases in interest rates on deposits of individuals in manat have been recorded. Since April, deposit auctions held by the Ministry of Finance to place the free balance of the unified treasury account continue to have an increasing effect on the liquidity position of the banking sector.
In this context, the CBA is trying to minimize the impact of factors outside monetary policy on the AZIR through one-week open market operations. Activity in the money market remains high. In the first eight months of 2025, the number of transactions in the unsecured market increased by 19 percent compared to the same period last year.
"The balance of risks to inflation hasn't notably changed since the last meeting. The processes taking place in global trade continue to cause fluctuations in commodity and financial markets. In these circumstances, import prices are considered the main external risk factor for inflation. This factor depends on inflation in trading partners and the dynamics of the nominal effective exchange rate.
The main internal risk factor that can increase inflation can be noted as the activation of cost factors and excess growth in aggregate demand. The dynamics of aggregate demand until the end of the current year will depend primarily on the implementation of government spending. The annual growth rate of credit investments is expected to be lower by the end of 2025 compared to 2024.
The next decision on the parameters of the interest rate corridor will be made depending on the change in actual inflation, the macroeconomic forecasts to be updated in October, and the dynamics of external and internal risk factors.
When updating the forecasts, the expected dynamics of government spending for the rest of 2025 and 2026 will also be taken into account. The CBA will continue to use all the tools at its disposal to ensure price stability.
The next decision on the parameters of the interest rate corridor will be announced on October 22, 2025, and the relevant press conference will be held, the CBA statement said.
The AZIR (Azerbaijan Interbank Rate) index represents the weighted average of interest rates applied to unsecured interbank transactions denominated in Azerbaijani manat, functioning as a pivotal benchmark interest rate within the financial market ecosystem. Disseminated on a daily basis by the Central Bank of Azerbaijan (CBA), this publication serves as a critical instrument for assessing the efficacy of monetary policy frameworks, with its fluctuations exerting a significant impact on the prevailing deposit and lending rate structures within the national financial ecosystem.
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