In 2025, monetary policy will be aimed at ensuring price stability, which is the main mandate of the Central Bank of Azerbaijan, as well as stabilizing inflation within the established goal.
As Day.Az reports, this is stated in the CBA statement on the main directions of monetary policy for 2025.
It is noted that reforms to improve the monetary policy framework will continue.
“In accordance with the “Strategy for Socio-Economic Development of the Republic of Azerbaijan for 2022-2026”, the goal of monetary policy for the next year will be to maintain annual inflation at the level of 4±2%. As in previous years, the target for the next year is year will be the change in the consumer price index, calculated by the State Statistics Committee, over the past 12 months, according to the latest (October 2024) forecasts of the Central. Bank, in 2025, annual inflation is expected to be about 5.8%, which corresponds to the target level. The Central Bank will also regularly update its inflation forecasts based on a comprehensive analysis of inflation factors. In addition to overall inflation, the dynamics of core inflation will be constantly analyzed. The assessment of inflation expectations will also continue,” the information says.
The CBA emphasizes that price stability will continue to be subject to a number of external and internal risks.
“Next year, external factors, such as the dynamics of commodity prices on the world market, inflation processes and economic activity in partner countries, will continue to influence inflation processes in the country. In the context of ongoing geopolitical tensions, these external factors are expected to remain unstable. Among the internal risks to price stability are a possible excessive expansion of aggregate demand, changes in tariffs for government-regulated goods and services, as well as rising inflation expectations,” – the information says.
According to the CBA, in 2025, the main role in the transmission mechanism of monetary policy, as before, will be played by the currency channel.
“The nominal effective rate of the manat will remain one of the key factors influencing imported inflation. According to the latest calculations based on forecasts of international think tanks on bilateral exchange rates, the nominal effective rate of the manat will continue to strengthen in 2025. Next year, the interest rate corridor of the Central Bank will remain one of the main instruments for influencing monetary conditions in the economy. Decisions on the interest rate corridor will be made taking into account changes in the balance of inflation risks caused by external factors. and internal factors, as well as updated macroeconomic forecasts, as in previous years, in 2025 the discussion of the interest rate corridor will be held at meetings of the Board of the Central Bank in accordance with a predetermined schedule,” the CBA emphasizes.
The information notes that in 2025 the Central Bank will continue to pay attention to improving its analytical and forecasting potential.
“As part of the system of forecasting and policy analysis, the modeling apparatus will be regularly improved based on best practices, the coverage will be expanded and the content of research will be deepened. To expand the alternative statistical database, cooperation with government organizations and private structures will continue,” notes the CBA.
We previously reported that the Central Bank of Azerbaijan commented on the approved requirements for “open banking”.