BAKU, Azerbaijan, July 28. The recent cut in the Central Bank of Azerbaijan’s key interest rate reflects ongoing inflation trends and the regulator’s expectations for future inflation, Moody’s told Trend.
The agency noted that the July decision marked the first rate cut in 2025, with a modest reduction of 25 basis points: "Despite this move, Azerbaijan’s key rate remains one of the lowest in the region".
While changes to the key rate typically serve as a signal for the banking sector, Moody’s emphasized that in Azerbaijan, additional factors significantly influence interest rate dynamics.
“These include new reserve requirement regulations and the introduction of the Liquidity Coverage Ratio (LCR). We observed increased demand for deposits from large banks, which led to a rise in deposit costs in the market. Nevertheless, we expect stabilization later this year,” Moody’s said.
On July 23, the Central Bank of Azerbaijan (CBA) announced a 25-basis-point cut across all parameters of the interest rate corridor.
As a result, the benchmark rate was set at 7%, with the lower bound reduced to 6% and the upper bound to 8%.
According to the CBA, the decision was based on the alignment of actual inflation with its forecast trajectory, its placement within the target range of 4% ±2%, recent global economic trends, domestic macroeconomic conditions, continued stability in the foreign exchange market, and the transmission mechanism of monetary policy.
