Chief CIS Economist: Central Bank of Azerbaijan expected to extend pause in rate hikes

At its meeting on July 26, the Central Bank of Azerbaijan (CBAR) is expected to extend its pause in rate hikes and keep the rate unchanged at 9%, Deputy Head of Research at Russia’s Gazprombank, Chief CIS Economist, Gulnara Khaidarshina said, Report informs.

Among arguments in favor of such a decision, Gulnara Khaidarshina named a steady slowing of inflation (which, however, still exceeds the refinancing rate), a stable level of dollarization of household deposits, a weakening of the external inflationary backdrop and the need to form further conditions for growth in the non-oil and gas sector.

“At its June meeting, the CBAR suspended its monetary tightening cycle by keeping the rate unchanged at 9%. The lower and upper bounds of the interest rate corridor were maintained at 7.5% and 10%, respectively.

"At that time, the Central Bank commented that the decision to refrain from rate hikes was based on updated macroeconomic forecasts and factors affecting inflation. The CBAR stressed that measures taken earlier to raise the interest rate and adjust other parameters of the interest rate corridor alongside the appropriate use of monetary instruments in their new configuration, a raising of mandatory reserve requirements and changes to macro-prudential regulation had curbed inflationary pressure.

"The CBAR noted that, should the disinflationary trend persist, monetary tightening would likely be paused at least until September, with the prospect of further easing in the future. Given that the slowing of inflation has become a stable trend, we expect the pause in monetary tightening to be extended next week,” Gulnara Khaidarshina said.