Friday, July 31, 2020

Azerbaijan cuts rate 15th time as inflation below target

     Azerbaijan's central bank  lowered its benchmark interest rate for the third time this year and for the 15th time in 2-1/2 years, saying this decision took into account that actual and projected inflation was below the midpoint of its target range, the continued improvement in the international situation, the stability in the foreign exchange market and the anti-inflationary effects of weaker demand from the COVID-19 pandemic.
     The Central Bank of the Republic of Azerbaijan (CBA) cut its discount rate by another 25 basis points to 6.75 percent and has now cut it by 75 points this year following earlier cuts in January and June.
     Since February 2018, when CBA embarked on a monetary easing cycle, the rate has been cut 15 times and by a total of 8.25 percentage points from 15.0 percent.
      The floor of its interest rate corridor is now 6.25 percent and the ceiling at 7.25 percent.
      "The next decisions on the parameters of the interest rate corridor will depend on the degree of deviation of actual inflation from the forecast, changes in the situation in global markets, as well as the recovery of domestic demand and economic activity," CBA said after a meeting of its board on July 30.
      Inflation in Azerbaijan rose to 3.0 percent in June from 2.9 percent in May but remains below the midpoint of CBA's target range of 4.0 percent, plus/minus 2 percentage points.
      Inflation expectations are also continuing to decline, the bank said and the latest forecast points to inflation in a range of 3.0 to 3.5 percent by the end of this year.
      Lower imports and an improved international situation, along with a recovery of oil prices, helped the country's external balance and the country's foreign exchange reserves have now risen 1.2 percent since the start of the year to $US5.71 billion while CBA's foreign exchange reserves have risen 3.3 percent this year.
      But necessary measures to restrict activity due to the pandemic had a negative impact on economic activity in June and July and the confidence of households has also declined, the bank said despite anti-crises measures by the government and the central bank.
     "Significant uncertainties remain in the global environment over the medium term over the duration and effects of the pandemic," CBA said.


Post a Comment