Azerbaijan's central bank raised its key interest rate for the second month in row and said it didn't rule out raising the rate again in future policy meetings if the risks of inflation change.
The Central Bank of Azerbaijan (CBA) raised its discount rate by a further 50 basis points to 7.0 percent and has now raised it 75 basis points following a 25-point hike in September, which was the bank's first rate increase in 5 years.
"The decision about the discount rate was based on the persistence of inflationary pressures in the economy, the sustainability of the factors that are affecting it, rising prices in world markets, high inflation in trading partner countries and rising inflation expectations," CBA's monetary board said.
Inflation in Azerbaijan has been rising steadily this year and hit 5.2 percent in September compared with 3.3 percent in January, still within the central bank's target range of 2.0 to 6.0 percent.
"The external background of inflation remains unfavorable," CBA said, adding prices of energy products rose 2.1 times in September and is one of the main reasons for an acceleration in inflation.
CBA also said the rise in transportation and logistics costs and longer delivery times are the main reasons for the more intense inflationary pressures worldwide, with the cost of container up more than 4 times in September from last year while the delivery time of raw materials and finished products had increased almost twice.
It estimated four-fifths of inflation was due to non-monetary factors and about two-fifths was due to domestic cost factors, such as the liberalization of government-set prices.
CBA raised its forecast for inflation this year to average 6.2-6.5 percent, up from September's forecast of 5.4-5.8 percent, and the 2022 forecast to 5-6 percent from 4-5 percent.
"Economic activity is constantly growing," CBA said.
Azerbaijan's gross domestic product in the third quarter of this year was up 25.7 percent year-on-year, down from 35.5 percent in the second quarter.
While the COVID-19 pandemic is still hampering growth of the services sector, the overall level of employment is rising and retail turnover in the first 9 months was up 2.8 percent, the bank said.
The Central Bank of Azerbaijan (CBA) raised its discount rate by a further 50 basis points to 7.0 percent and has now raised it 75 basis points following a 25-point hike in September, which was the bank's first rate increase in 5 years.
"The decision about the discount rate was based on the persistence of inflationary pressures in the economy, the sustainability of the factors that are affecting it, rising prices in world markets, high inflation in trading partner countries and rising inflation expectations," CBA's monetary board said.
Inflation in Azerbaijan has been rising steadily this year and hit 5.2 percent in September compared with 3.3 percent in January, still within the central bank's target range of 2.0 to 6.0 percent.
"The external background of inflation remains unfavorable," CBA said, adding prices of energy products rose 2.1 times in September and is one of the main reasons for an acceleration in inflation.
CBA also said the rise in transportation and logistics costs and longer delivery times are the main reasons for the more intense inflationary pressures worldwide, with the cost of container up more than 4 times in September from last year while the delivery time of raw materials and finished products had increased almost twice.
It estimated four-fifths of inflation was due to non-monetary factors and about two-fifths was due to domestic cost factors, such as the liberalization of government-set prices.
CBA raised its forecast for inflation this year to average 6.2-6.5 percent, up from September's forecast of 5.4-5.8 percent, and the 2022 forecast to 5-6 percent from 4-5 percent.
"Economic activity is constantly growing," CBA said.
Azerbaijan's gross domestic product in the third quarter of this year was up 25.7 percent year-on-year, down from 35.5 percent in the second quarter.
While the COVID-19 pandemic is still hampering growth of the services sector, the overall level of employment is rising and retail turnover in the first 9 months was up 2.8 percent, the bank said.
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