Azernews.Az

Qabil Ashirov

Read more

As Azerbaijan prepares for its next monetary policy announcement on October 22, 2025, all eyes are on the Central Bank to gauge whether it will maintain its current interest rates or signal a shift in policy. According to the 2025 schedule for public announcements of monetary decisions, the upcoming meeting marks a critical juncture in the country’s effort to balance inflation control with economic growth.

On September 10, 2025, the Central Bank’s Board decided to hold the key policy rate steady at 7 percent, with the interest rate corridor remaining at 6–8 percent. This decision was informed by multiple factors: the trajectory of actual inflation relative to the 4±2 percent target, global economic trends, domestic macroeconomic conditions, ongoing stability in the currency market, and the transmission mechanism of monetary policy. By signaling a cautious stance, the Bank appeared intent on carefully calibrating the economy without stifling growth.

Earlier, on July 23, 2025, the Central Bank had lowered all parameters of the interest rate corridor by 0.25 percentage points, adjusting the key rate to 7 percent, the lower bound to 6 percent, and the upper bound to 8 percent. This move reflected an accommodative stance designed to stimulate domestic demand while monitoring inflation dynamics.

Yet September data revealed an acceleration in inflation. Annual inflation rose from 4.9 percent in August to 5.7 percent, according to the State Statistical Committee. Food, alcoholic beverages, and tobacco prices increased by 7.9 percent; non-food products by 2.4 percent; and paid services for households by 5.3 percent compared to the same month last year. The uptick in consumer prices underscores the Central Bank’s challenging task of balancing economic support with price stability.

Analysts suggest that, despite the uptick, the Bank may adopt a “wait-and-see” approach on October 22, leaving interest rates unchanged. Public statements by Bank officials have indicated that current rates are at neutral levels, allowing flexibility in responding to either acceleration or moderation in inflation. Should inflation continue to rise, rates could be raised; conversely, if inflation slows, the Bank could pursue further cuts to stimulate the economy.

Some market observers, however, interpret the Bank’s recent actions as indicative of a longer-term trend toward rate reductions. According to economist Natig Jafarly, speaking to AzerNews, another rate cut is highly likely before year-end.

“The Central Bank will likely lower the policy rate by 0.25 percent again. This could happen either at tomorrow’s meeting or at the final meeting of the year. The trend is clear: rates will not be increased, and the Bank is moving toward a reduction. Even if the cut is not implemented tomorrow, we will witness it before the year concludes,” Jafarly noted.

This perspective reflects a cautious optimism that the Bank can provide economic stimulus without undermining currency stability or letting inflation spiral. Indeed, the Central Bank has shown a deliberate, step-by-step approach, signaling to markets that any adjustments will be calibrated carefully. The challenge, however, lies in balancing these domestic measures with external pressures. Global commodity prices, exchange rate volatility, and cross-border capital flows all play roles in shaping the Bank’s decisions.

For businesses and consumers, the implications are significant. Stable or slightly reduced rates could encourage lending and investment, supporting Azerbaijan’s broader economic objectives. For households, predictable rates help manage borrowing costs amid rising prices, while businesses can better plan capital expenditures and expansions.

Ultimately, the October 22 decision will not only reflect the Central Bank’s response to recent inflation data but also its strategic view of economic growth and financial stability in a rapidly evolving global context. While short-term volatility may tempt policymakers to act aggressively, the overarching narrative points to a measured approach, with a modest rate reduction by year-end serving as a likely course.

In this environment, investors, economists, and market participants will closely interpret the Bank’s guidance for signals about Azerbaijan’s macroeconomic trajectory. The delicate balance between controlling inflation and fostering growth remains at the heart of the Bank’s policy calculus—a balancing act that will define Azerbaijan’s economic performance in the months ahead.