IMF: CBA should raise policy rates if inflationary pressures persist

The Central Bank of Azerbaijan (CBA) should raise policy rates if inflationary pressures persist, according to the International Monetary Fund (IMF), Report informs.

The IMF forecasts inflation in Azerbaijan for 2026 at 6%.

"Clear and forward-looking communication is becoming increasingly important as the central bank relies more on inflation forecasts to guide monetary policy. Material improvement in the passthrough to the broader economy will require further development of a risk-free yield curve, and continuing progress in addressing long-standing structural issues such as dollarization, high operating costs, and low competition in the banking sector," the IMF notes.

Analysts note that the transition to Basel III has minimized risks for Azerbaijan's financial sector.

"However, the CBA should remain vigilant to the adequacy of the resources going forward, especially as individual banks' risks become better understood through the Basel III pillar II process," the statement says.

The discount rate currently stands at 6.5%.