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29 October 2026, Baku: The Management Board of the Central Bank of the Republic of Azerbaijan decided to keep unchanged the refinancing rate at 6.5%, the floor of the interest rate corridor at 5% and the ceiling of the corridor at 7.5%. The Board took into account the dynamics of headline and core inflation, inflation expectations, and the balance of risks when deciding on the parameters of the interest rate corridor. It also considered developments in the foreign exchange market, changes in the liquidity position of the banking sector, and recent trends in global monetary conditions.
Annual inflation is within the target range (4±2%) and is moving in line with the projected path under the baseline scenario. In September 2026, twelve-month inflation stood at 5.5%, 0.2 pp lower than in August. Annual inflation was 6.9% for food, alcoholic beverages and tobacco products, 5.1% for paid services, and 3.6% for non-food goods. Annual core inflation stood at 4.9%.
Supply significantly prevailed over demand both in cash and cashless segments in the FX market. Over 9 months of 2026, cash foreign currency purchases by exchange offices exceeded sales by $759M. Dollarization of resident individuals’ deposits decreased by 3.3 pp to 25.7% year-over-year in September 2026.
Amid a sharp decline in demand and an increase in supply, the Central Bank purchased foreign currency to absorb the excess supply in the FX market. Over 9 months, FX reserves of the Central Bank increased by 33.4% to $15.4B.
The external sector indicators remain favorable. According to the State Customs Committee, trade surplus amounted to $10.5B in January-September 2026. Preliminary data show that, in January-September remittances surplus (the difference between inflows and outflows) amounted to $830.5M (year-over-year up by 70%). Against the backdrop of elevated prices for key export commodities and continued positive trends in non-oil and gas exports of goods and services, the Central Bank revised upwards its forecasts for the current account surplus in 2026 and 2027. Under updated forecasts, current account surplus is expected to amount to $8.5B (over 10% of GDP) in 2026 and $5.4B (over 6% of GDP) in 2027.
Monetary sector indicators are shaped by conditions of excess liquidity. Excluding required reserves, the banking sector's structural liquidity surplus (the difference between the Central Bank's liabilities to banks and its claims on the banking system) reached AZN6.2B by the end of September 2026 (up by 2.2 times compared with December of the previous year). On this backdrop, benchmark rates in the unsecured money market tended to decline slightly. The average daily AZIR rate stood at 6.31% in August 2026, 5.93% in September and 5.99% over the past period of October. Monetary policy tools are implemented taking into account financial market developments and banking system liquidity. The Central Bank primarily uses seven-day deposit operations to manage liquidity, which accounted for 66.4% of the sterilization portfolio under open market operations as of end-September.
The Central Bank predicts annual inflation to remain within the target range in the medium term. According to the October forecasts under the baseline scenario, annual inflation is expected to stand at 5.9% both at the end of 2026 and in 2027. The inflation forecast was revised down by 0.2 pp for 2026 and up by 0.1 pp for 2027 compared to the July forecast (the baseline scenario assumes that state-regulated prices and tariffs remain unchanged).
Inflation risks are primarily driven by the external environment. Against the backdrop of global geopolitical uncertainty, the risk of higher energy and food prices, and the risk of these increases to pass through to domestic prices from major trading partners, remains significant. The extent of this pass-through will depend, among other factors, on dynamics of the nominal effective exchange rate of the manat. In the upcoming period, the Central Bank’s inflation forecasts will be revised primarily depending on the extent to which these risks materialize. Under the current fiscal and monetary policy conditions, domestic demand is not expected to significantly intensify inflationary pressures.
For the rest of the year, decisions on the parameters of the interest rate corridor will continue to be based on the inflation forecast, the dynamics of key macroeconomic indicators and FX market developments. In view of uncertainties in the global environment and the intensity of their transmission to the domestic economy, the Central Bank will continue to review macroeconomic projections under several scenarios.
Information regarding the next decision on the parameters of the interest rate corridor will be announced to the public on 23 December 2026.
29.10.2026