Azerbaijan's central bank cut its benchmark refinancing rate by 50 basis points to 4.25 percent due to the low level of inflation and the need to further support growth.
The Central Bank of the Republic of Azerbaijan (CBA), which last cut its rate in February 2013, also lowered and narrowed its interest rate corridor.
The rate of the upper limit of the corridor was cut to 6.0 percent from 7.0 percent while the lower limit was reduced to 0.5 percent from 1.0 percent, the bank said.
The bank said the country's economy continued to grow in the first quarter, with the non-oil sector the main source while currency reserves had also grown.
Azerbaijan's inflation rate fell to 2.0 percent in March from 2.1 percent the previous month. The central bank has forecast inflation between 1.0 and 5.0 percent this year, with an outcome of 2.4 percent as the most likely. The CBA's inflation target is 5-6 percent.
Azerbaijan's Gross Domestic Product expanded by an annual rate of 2.5 percent in the first quarter of this year, down from 5.8 percent in the fourth quarter of 2013.