BAKU, Azerbaijan, September 23. The Central Bank of Azerbaijan (CBA) kept its key rate unchanged at 6.5% and the upper bound of the interest rate corridor at 7.5%, while cutting the lower bound by 0.5 percentage points to 5%, the CBA said.
The decision on the parameters of the interest rate corridor took into account actual and projected inflation trends, developments in the foreign exchange market, changes in the banking sector’s liquidity position and recent trends in global monetary conditions.
The reduction in the lower bound of the interest rate corridor is aimed at encouraging trading in the interbank money market amid excess liquidity in the banking sector. The widening of the corridor is expected to encourage banks to conduct more active transactions among themselves by reducing the CBA’s participation in the money market.
Meanwhile, keeping the upper bound of the corridor and the key rate unchanged is aimed at stabilizing inflation expectations.
Annual inflation remains within the target range and is moving in line with the projected trajectory under the baseline scenario. Twelve-month inflation stood at 5.7% in August 2026, down 0.1 percentage points from July.
Annual price growth was 7.2% for food, alcoholic beverages and tobacco products, 5.0% for paid services and 3.7% for non-food products. Annual core inflation stood at 5.1%.
The CBA’s forecast that annual inflation will remain within the target range over the medium term remains unchanged.
In the period so far this year, supply has significantly exceeded demand in the foreign exchange market, both in the cash and non-cash segments.
During the first eight months of 2026, foreign exchange offices purchased $673 million more in cash foreign currency from customers than they sold.
The dollarization rate of deposits held by resident individuals fell by 3.7%age points over the past 12 months to 25.8% in July 2026.
Amid a sharp decline in demand and an increase in supply in the foreign exchange market, the CBA conducted foreign currency purchases. Over eight months, the CBA’s foreign exchange reserves increased by 32.9% to $15.3 billion, reaching a record high.
External sector indicators remain favorable. According to customs statistics, Azerbaijan recorded a positive foreign trade balance of $10.4 billion in January-August 2026.
According to preliminary data, the balance of remittances — the difference between inflows and outflows — amounted to $751 million in January-August, up 74.1% from the same period last year.
Amid higher global energy prices and continued positive trends in non-oil and gas exports of goods and services, the CBA’s forecast for the current account surplus at the end of 2026 could be revised upward.
Excluding funds held as required reserves, the banking sector’s structural liquidity surplus — the difference between the CBA’s liabilities to the banking system and its claims on banks — reached 6.3 billion manats ($3.71 billion) at the end of August, increasing 2.2 times compared with December last year.
In this environment, benchmark rates in the unsecured money market have tended to decline somewhat. The average daily AZIR rate stood at 6.39% in July 2026, 6.28% in August and 6.02% in the period of September through the date of the report.
Monetary policy instruments are applied taking into account developments in financial markets and liquidity indicators in the banking system.
The CBA mainly uses seven-day deposit operations to manage liquidity. These operations accounted for 70.8% of the sterilization portfolio under open market operations at the end of August.
At the same time, the volume of the CBA’s note portfolio increased more than fourfold by the end of August compared with the end of last year.
No significant change has been observed in the balance of inflation risks since the previous meeting.
Against the backdrop of global geopolitical uncertainty, the risk of higher energy and food prices, as well as the pass-through of these increases to domestic prices from major trading partners, remains significant.
The extent of this pass-through will depend, among other factors, on movements in the nominal effective exchange rate of the manat.
Going forward, the likelihood of changes to the CBA’s inflation forecasts will depend mainly on the scale at which these risks materialize. Under current fiscal and monetary policy conditions, domestic demand is not expected to increase inflationary pressures.
For the remainder of the year, decisions on the interest rate corridor will continue to take into account the inflation outlook, the dynamics of key macroeconomic indicators, developments in the foreign exchange market and changes in banking sector liquidity.
Given uncertainty in the global environment and the intensity with which these developments may be transmitted to the domestic economy, macroeconomic forecasts will continue to be considered under several scenarios.
The decision will take effect on September 24, 2026.
The schedule for announcing monetary policy decisions in 2026 has also been revised. The announcement of the next decision on the parameters of the interest rate corridor, along with the related news conference, has been moved from November 4 to October 29, 2026. A meeting with experts is also planned for the same day.
