13 March 2017, Baku: The Central Bank’s Management Board discussed recent macroeconomic processes, factors affecting inflation, and actions to manage them, and the way the monetary policy is implemented at its 10 March 2017 meeting.

Year on year increase in oil prices, drop in average monthly non-oil import versus average monthly indicators of the last quarter of the previous year, resulting in start of rebalancing trends in the current account of the balance of payments as a contribution to macroeconomic stability were among the issues under discussion.

Macroeconomic stability related efforts, as well as the implementation of the actions plan approved by the Financial Stability Board yield positive results. Effective management of money supply, close coordination of monetary and fiscal policies, and complex actions tailored to the monetary program to rebalance the forex market allowed to flexibly regulate inflationary risks. CBA’s large-scale sterilization optimized the size of money base – a new monetary policy anchor.

The actions taken and observed positive processes provide a background for transition to a more flexible exchange rate regime. The CBA took a number of decisions to make the exchange rate regime more flexible. A new currency auction mechanism, and removal of the limit imposed on the official exchange rate with respect to cash and cashless sale of foreign currency rebalanced the market. Over the past period of the current year the national currency has slightly appreciated stipulating better inflation expectations.

In February 2017 inflation rates dropped compared to the previous month amid the said processes.

A single-digit inflation rate is likely to be on horizon by the end of the current year depending on the effectiveness of the adopted macroeconomic policy framework and the continuity of positive trends in the balance of payments and the forex market.

In light of initial positive trends in the macroeconomic arena and new expectations the CBA Management Board unanimously decided to leave interest rate corridor parameters and the refinancing rate unchanged.