On parameters of interest rate corridor

20-03-2020

19 March 2020, Baku: The Management Board of the Central Bank of the Republic of Azerbaijan decided to leave the refinancing rate unchanged at 7.25%. The ceiling of the interest rate corridor was kept at 9%, while the floor was increased to 6.75%.

This decision was taken in light of considerable changes in global environment and emerged uncertainties since the last Board meeting dedicated to the monetary policy.

Amid rising negative impact of the coronavirus pandemic on the global economy since early March, the oil price plunged by more than 2 times due to OPEC+ deal failure.

On the backdrop of the external shock, concerted efforts by the Azerbaijani Government and the Central Bank maintain rebalancing in the FX market. Inflation has not undergone significant changes, 12-month inflation stood at 2.9%, below the target band center. Money base has decreased by 11% since early year, attributable to tougher monetary condition.

Nevertheless, over the period economic activity was maintained, economic growth was 2.8%, and non-oil economic growth was 6.7%.

Negative effects of the non-monetary shock from the global economy on both domestic demand and supply make the Central Bank to balance price and financial stability with economic activity and employment.

Economic and financial potential of recent years suffices to optimize the said set of objectives. The Bank will expand its portfolio to sterilize excess money supply and fully cover the demand of the banking system for liquidity with available tools in its arsenal, when necessary.

Under these circumstances the Central Bank daily monitors developments in the global environment and in the country economy in parallel with ongoing analyses to assess the impact of the external shock on the country economy.

The decision takes effect on 19 March 2020. The next decision of the Management Board of the Central Bank on the interest rate corridor parameters will go public on 1 May 2020 aided by a related press conference.