By CentralBankNews.info
Azerbaijan’s central bank lowered it benchmark refinancing rate for the fourth time in a row and said further normalization of monetary conditions would depend on how consistent the forecast for inflation is with the inflation target.
The Central Bank of Azerbaijan (CBA) cut its key rate by 25 basis points to 9.75 percent and has now cut the rate by 525 basis points this year as it continues to unwind four large rate hikes in 2016.
With the refinancing rate now at 9.75 percent, the ceiling of the central bank’s interest rate corridor is 11.75 percent and the floor at 7.75 percent.
Between February and September 2016, CBA raised its rate by a total of 1200 basis points to 15.0 percent to shore up the manat currency and curb inflation after the plunge in global crude oil prices undermined investor’s confidence.
The CBA then maintained the rate at 15.0 percent from September 2016 through 2017 but by February this year inflation was decelerating sharply, the CBA had stabilized the manat and oil prices were continuing to rise.
Azerbaijan, which borders the Caspian Sea, Iran and Georgia, relies on oil and gas for some 95 percent of its exports.
Inflation in Azerbaijan declined to 2.6 percent in September, continuing a steady decline since 5.5 percent in January, and the CBA forecast inflation of 3.0 – 4.0 percent by the end of this year, below its target range of 6.0 to 8.0 percent.
CBA said current consumer behavior indicates stable inflation expectations and external conditions have remained favorable with the trade balance positive and non-oil exports up 13 percent year-on-year.
The domestic foreign exchange market also remains in balance and CBA expects the external environment to remain positive for the remainder of this year.
Foreign exchange reserves reached US$45 billion, the central bank said.
The economy has been expanding in the last four quarters after two years of recession but activity remains below potential, CBA said, adding overall economic growth was 0.8 percent in the first nine months and including the non-oil sector it grew by 1.1 percent.
