Azerbaijan's central bank cut its benchmark refinancing rate by 75 basis points to 3.50 percent, its second rate cut this year, and also cut the ceiling on its interest rate corridor by 100 basis points to 5.0 percent and lowered the lower limit to 0.1 percent from 0.5 percent.
The Central Bank of the Republic of Azerbaijan (CBA), which has now cut its key rate by 125 basis points this year, also cut the reserve requirements on all bank deposits to 2.0 percent from 3.0 percent. It last cut the rate on April 30.
The CBA said the rate cut came against a back drop of a low level of inflation, the growth of money supply along with demand factors that affect economic growth.
Azerbaijan's headline inflation rate fell to 1.6 percent in June, the sixth consecutive month of declining inflation. The CBA has forecast 2014 inflation between 1.0 and 5.0 percent, with 2.4 percent the most likely. The central bank targets inflation of 5.0 to 6.0 percent.
The CBA said Azerbaijan's economy expanded by 2.1 percent in the first half of the year, including 7 percent growth in the non-oil sector.
Data shows that Azerbaijan's Gross Domestic Product expanded by an annual 2.5 percent in the first quarter of this year, down from a 5.8 percent rate in the fourth quarter of last year.