9 September 2016, Baku: A set of measures is being taken to ensure macroeconomic and financial stability, maintain an acceptable level of inflation, and strengthen confidence in the national currency. As part of these measures, the growth channels of money supply were managed expediently over the past period of this year, using relevant mechanisms of macroeconomic policy effectively, making necessary corrections to quantity parameters of monetary policy tools, and carrying out large-scale sterilization operations.
Over 2016, the exchange rate of the national currency changed in compliance with trends in the balance of payments and the demand and supply ratio in the foreign exchange market within the new exchange rate regime announced at the end of the previous year. The Central Bank minimized its participation in the foreign exchange market, intervening in the market only for regulating severe short-term fluctuations of the exchange rate. The State Oil Fund of the Republic of Azerbaijan sold foreign exchange through forex auctions organized by the Central Bank over the period.
Given recent changes in the behavior of some foreign and domestic factors affecting the inflation, additional anti-inflationary measures needed to be taken.
Thus, the State Oil Fund of the Republic of Azerbaijan and the Central Bank substantially increased foreign exchange supply in the auctions in order to adjust severe exchange rate fluctuations, thereby affecting expectations and balance in the forex market.
Furthermore, the Central Bank modified the quantity parameters of monetary policy tools given macroeconomic forecasts, as well as trends in the balance of payments and forex market. The Management Board of the Central Bank took a decision on raising the interest rate corridor floor on liquidity operations up to 12 percent, the corridor ceiling up to 18 percent, and the refinancing rate up to 15 percent on 14 September 2016.