Azerbaijan Holds Key Rate at 6.5%

The Central Bank of the Republic of Azerbaijan kept its discount rate unchanged at 6.5% in May 2026, while also leaving the interest rate corridor unchanged, with the lower bound at 5.5% and the upper bound at 7.5%. The decision reflects inflation remaining within target, with headline inflation at 5.6% in March 2026 and core inflation at 5.5%, driven by food, non-food goods, and services. External conditions remain supportive, with a solid trade surplus and improved current account outlook supported by higher energy prices and non-oil exports. The FX market showed excess supply, boosting reserves and reducing deposit dollarization, while liquidity stayed stable and money market rates remained near the policy rate. Inflation is projected at 5.9% in 2026 and 4.5% in 2027, remaining within target, though risks are tilted upward from global cost pressures, geopolitical tensions, and imported inflation. Future policy depends on inflation expectations and macroeconomic conditions.

The Central Bank of the Republic of Azerbaijan kept its discount rate unchanged at 6.5% in April 2026, sustaining a pause in its easing cycle as inflation remains within the 4±2% target range. The interest rate corridor was also left intact, with the lower bound at 5.5% and the upper bound at 7.5%, signaling a balanced approach to liquidity management. The decision reflects easing price pressures, with annual inflation at 5.7% and core inflation at 5.6% in February, largely driven by external factors. The broader macroeconomic environment remains stable, supported by solid non-oil sector growth and a strong external position. The country continues to benefit from a sizable trade surplus and rising foreign exchange reserves, helping anchor currency stability. However, policymakers flagged lingering global risks, which could feed into inflation. The central bank reiterated its data-dependent stance, emphasizing readiness to adjust policy if inflation deviates from its baseline outlook.

The Central Bank of the Republic of Azerbaijan cut its discount rate by 0.25 percentage points to 6.5% at its February 2026 meeting, the lowest since September 2021, continuing its gradual easing cycle as inflation remains within the 4±2% target range. The decision also adjusted the interest rate corridor accordingly, setting the lower limit at 5.5% and the upper at 7.5%, signaling policymakers’ intent to maintain adequate liquidity. The move reflects the central bank’s view that price pressures are easing, with a recent downward trend in inflation and core inflation close to target, alongside stability in foreign exchange and rising FX reserves. Officials noted that inflation risks have not changed significantly, with external price transmission and domestic cost factors remaining the main variables to watch. Going forward, the Bank reaffirmed its data-dependent stance, emphasizing readiness to modify policy if actual or forecast inflation deviates from its baseline outlook.