Central Bank keeps refinancing rate and other interest rate corridor parameters unchanged

Press releases A - A + Interest rate corridor parameters remain unchanged

June 24, 2026, Baku: By decision of the Board of Directors of the Central Bank of the Republic of Azerbaijan, all parameters of the interest rate corridor have been kept unchanged. When adopting the decision on the parameters of the interest rate corridor, the stabilization of actual and forecasted inflation within the target range, the geopolitical situation, trends in global financial markets, and the domestic macroeconomic environment were taken into account.

Annual inflation is within the target and is moving in line with the base scenario trajectory. In May 2026, 12-month inflation amounted to 5.6%. Annual price growth was 6.6% for food products, alcoholic beverages, and tobacco products, 5.7% for paid services, and 3.9% for non-food products. Annual core inflation stood at 5.6%.

During the period elapsed this year, supply in the currency market exceeded demand. This was evident in both the cash and non-cash segments. In the first five months of 2026, the purchase of cash foreign currency by exchange offices exceeded sales by $311 million. The level of dollarization of deposits of resident individuals decreased by 2.8 percentage points over the last 12 months, reaching 27% in May 2026.

The volume of inward remittances to the country from January to May increased by 28.8% compared to the same period of the previous year, amounting to $560.1 million. In conditions of a significant decrease in banks' demand in currency auctions, the Central Bank carried out purchase-oriented interventions. In the first five months of the current year, the Central Bank's foreign exchange reserves increased by $1.2 billion, or 10.4%, reaching $12.7 billion.

External sector indicators remain favorable. According to customs statistics, a positive balance of $7.2 billion was recorded in the country's foreign trade in January-May 2026. The Central Bank's forecast for the current account surplus by the end of 2026 is expected to improve further. This is due to the rise in global energy prices in recent months, as well as the continuation of positive trends in non-oil and gas exports.

Monetary policy tools are applied taking into account processes in financial markets and liquidity indicators in the banking system. Short-term interest rates in the unsecured money market form within the framework of the Central Bank's interest rate corridor, at a level close to the refinancing rate. Specifically, the average daily indicator for the AZIR rate has been in the interval of 6.43-6.44% since the end of March 2026. In conditions of excess liquidity, the Central Bank mainly uses 7-day deposit operations to manage the AZIR at a level close to the refinancing rate. By the end of May, the share of 7-day deposit operations in the structure of the sterilization portfolio for open market operations amounted to 88.7%.

At the same time, regular auctions for the placement of the Central Bank's notes are also held. In May and June, the yield of notes across all maturities has shown a downward trend. An increase in excess liquidity in the banking sector is expected for the rest of the year. The forecast for annual inflation to remain within the target remains unchanged for the current and next year.

However, activation of cost factors of external origin in inflation is observed. Changes in the global economic environment since the last meeting increase the probability of rising external inflation risks. In the rapidly changing global environment, the rise in world food and fertilizer prices, the increase in transport and logistics costs, the expansion of inflation import from trading partner countries, and the slowdown in the pace of strengthening of the nominal effective exchange rate could increase external risk factors for inflation. In-depth analyses are being conducted regarding the durability of these factors.

In the domestic environment, the probability of excessive expansion of aggregate demand is not high against the background of existing fiscal and monetary policy. Further decisions regarding the interest rate corridor in the rest of the current year will be given taking into account the inflation forecast and the dynamics of macroeconomic indicators. Taking into account uncertainties in the global environment, forecasts of macroeconomic indicators will be reviewed under several scenarios. When making decisions on the parameters of the interest rate corridor, the dynamics of liquidity in the banking sector and its direct and indirect effects will also be taken into account.

The schedule for announcing monetary policy decisions for 2026 has been amended. Specifically, the date for announcing the next decision on the parameters of the interest rate corridor and the related press conference has been changed from August 5, 2026, to July 31, 2026. A meeting with experts is also planned for that day.

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