The Central Bank of Azerbaijan has increased the discount rate by 25 basis points (b.p.) – up to 8.5% per annum.

The Central Bank reports that the lower threshold of the interest rate corridor was increased from 6.25% to 6.75%, the upper threshold – from 9.25% to 9.5%.

This decision comes into force on February 1.

Last year, the Central Bank raised the rate four times. The 8.25% rate had been in effect since December 16, 2022, when it was raised from 8%.

Inflation will slow down to 8% in 2023

The Central Bank of Azerbaijan forecasts that inflation in the country will slow down to 8% in 2023. “In 2022, annual (12-month) inflation in Azerbaijan amounted to 14.4%. At the same time, inflation peaked at 15.6% in September. Food inflation remains high – 19% by the end of 2022,” the Central Bank said.

The Central Bank notes that currently there is some uncertainty in terms of inflation given the geopolitical situation in the world. The regulator notes that it will continue to influence within the framework of monetary policy in order to reduce inflation.

Average annual inflation in Azerbaijan in 2022 accelerated to 13.9% against 6.7% in 2021. Azerbaijani authorities attribute the growth of inflation to the rise in the cost of imports and rising prices of food products in the world.

The Ministry of Economy of Azerbaijan forecasts average annual inflation in the country in 2023 at 6.9%.