Baku, Azerbaijan, Feb.2
By Zeyni Jafarov – Trend:
The discount rate was kept at the level of 6.25 percent contrary to expectations of a decrease in the refinancing rate of the Central Bank of Azerbaijan (CBA) by 0.25 percentage points, Gulnara Khaidarshina, Deputy Head of Russian Gazprombank’s Market Research Department, told Trend on Feb.1.
According to Khaidarshina, the decreased need was a condition for shifting the balance of risks towards a slowdown in the economy. However, the tone of the Central Bank of Azerbaijan, taking into account external risks, remained cautious.
She noted that the decision to keep the rate unchanged at the first meeting in 2021 was based primarily on the projected acceleration of inflation by the end of the year amid fiscal stimuli and recovery in consumer demand, as well as on the expected transition of the stimulating function to the budget in the coming year.
The Russian bank’s representative also emphasized that given the continued concern about the uncertainty of the external conditions, the CBA will take a cautious approach to reduce the rate throughout 2021.
"It’s predicted that the CBA's ‘window’ for easing monetary conditions will close, given the expected short-term recovery in economic activity due to the first results of mass vaccinations," said Khaidarshina.
At the same time, in her opinion, the leading role in stimulating the economy will go to fiscal incentives in the face of the budget deficit for the coming year, which is planned at 4.1 percent of GDP.
"In connection with the above factors, it can be predicted that by the end of 2021 the Central Bank of Azerbaijan may take a break in reducing the rate," she summed up.
As earlier reported, on January 29, 2021, the Board of the Central Bank of Azerbaijan decided to keep the discount rate at 6.25 percent. At the same time, the upper limit of the interest rate corridor was kept at the level of 6.75 percent, and the lower limit - 5.75 percent.
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