Azerbaijan keeps key interest rate unchanged at 6.5%

Azerbaijan’s central bank left its benchmark refinancing rate unchanged at 6.5% on Wednesday, citing inflation within the target range and favourable external sector indicators.

The central bank also kept the lower bound of the interest rate corridor at 5.5% and the upper bound at 7.5%.

Annual inflation stood at 5.6% in May and continued to move in line with the central bank’s baseline forecast, the regulator said.

The bank said conditions in the foreign exchange market remained favourable, with foreign currency supply exceeding demand. The central bank’s foreign exchange reserves rose by $1.2 billion, or 10.4%, in the first five months of the year to reach $12.7 billion.

The country’s foreign trade surplus amounted to $7.2 billion in January-May, while money transfers from abroad increased by 28.8% year-on-year to $560.1 million.

The regulator expects inflation to remain within the target range in 2026 and 2027, although external inflation risks have increased due to rising global food, fertiliser and transport costs.

The central bank also expects excess liquidity in the banking sector to increase further and said future interest rate decisions would take into account inflation forecasts, macroeconomic developments and liquidity conditions.

The next decision on the interest rate corridor is scheduled for Aug. 5.