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22 October 2025, Baku: The Management Board of the Central Bank of the Republic of Azerbaijan has decided to keep the refinancing rate unchanged at 7%, the floor of the interest rate corridor at 6%, and the ceiling at 8%.
The decision has been made considering the alignment of actual inflation with the forecasted target range (4±2%), global economy and financial market developments, domestic macroeconomic conditions, and the transmission of monetary policy decisions to the real sector.
Currently, annual inflation is aligning with the forecast trajectory. In September 2025, 12-month inflation stood at 5.7%, while annual price increases were 7.9% for food products, alcoholic beverages, and tobacco products, 5.3% for paid services, 2.4% for non-food items. Annual core inflation stood at 4.9%.
Persistent uncertainties in the international environment are causing fluctuations in global commodity prices. According to the IMF, the commodity price index increased by 3.3% year-on-year in September 2025, while the food and beverages price index decreased by 2.6%. The IMF left its 2025 projection unchanged (4.2%), and slightly revised upward the one for 2026 (3.7%).
The FX market remains stable, with overall supply exceeding demand. Foreign currency purchase operations have exceeded sales operations over the past seven months. Dollarization of resident individuals’ savings has decreased by 1.8 percentage points over the past twelve months to 29%, reflecting optimistic exchange-rate-related expectations. The key factor of the FX market equilibrium – the external sector indicators remain favorable. According to the State Customs Committee, foreign trade surplus amounted to $1.8B during nine months of 2025. Positive year-on-year dynamics in remittances supports current account surplus of the balance of payments. The Central Bank slightly revised upward its current account surplus forecast for the yearend of 2025, while the forecast for 2026 was kept unchanged.
Monetary policy tools are applied in response to financial market developments and changes in banking system liquidity. The unsecured money market has been highly active since the last meeting. The number of transactions increased by 16.1% year-on-year for 9 months. Interest rates in this market moved within the Central Bank’s interest rate corridor, close to the refinancing rate. The average daily rate of the AZIR index was 7.15% in July, 6.97% in August, 6.96% in September and 6.89% over the initial period of October. The Central Bank strives to minimize the effect of autonomous factors on AZIR with its one-week open market operations. The European Bank for Reconstruction and Development’s issuance of manat-denominated bonds linked to the AZIR index further reinforces its role as a benchmark reference rate in financial markets. The yield curve and yields on Central Bank notes have declined since the last meeting. Similarly, newly attracted deposits and newly issued loans in manat have decreased, reflecting the reduction in the interest rate corridor parameters in July 2025.
Under the baseline scenario, as of end-2025 and in 2026 annual inflation is projected to be within the target range. According to baseline October forecasts, annual inflation is expected to stand at 6% in 2025 and at 5.7% in 2026 with the upward revision driven by supply-side factors.
The balance of inflation risks has not changed significantly since the last meeting. Global trade instability continues to trigger fluctuations in commodity and financial markets. The effect of import prices, the key external risk factor for inflation, is dependent on inflation in trade partners and the dynamics of the nominal effective exchange rate. As for domestic risk factors, updated forecasts indicate that inflation in the upcoming period will be driven primarily by supply- and cost-related factors. The initial parameters of the 2026 state budget, together with a slowdown in the annual growth of credit, reduce the risk of aggregate demand overheating.
Decisions regarding the parameters of the interest rate corridor will depend on actual inflation and the dynamics of external and domestic risk factors. The Central Bank will continue to employ all available tools to ensure price stability.
Information regarding the next decision on the interest rate corridor parameters will be made public on 10 December 2025.
22.10.2025