Central Bank of Azerbaijan makes decision to keep other parameters of discount rate and interest corridor unchanged


Management Board of Central Bank of Azerbaijan (CBA) passed a decision on November  15, 2017 to keep other parameters of interest corridor (the discount rate at 15%, lower limit of corridor at 10%, upper limit – 18%) unchanged.


Positive dynamics is observed in growth of non-oil economy and macroeconomic stabilization plays a special role in formation of this dynamics: "Stabilization of foreign balance allows currency market to be constant. Monetary condition is formed under the pressure of economy’s need for money, including fiscal sector’s need for liquidity and liquidity in banking system. Basically, non-monetary factors, as well as global rise in some food prices affected inflation. Analysis of mid- and long term factors on price stability shows that correction in the monetary policy is important”.


The CBA said that following macroeconomic trends have been taken into consideration while passing the decision on parameters of the interest corridor: "According to the State Statistical Committee, the non-oil sector grew 2.5% in nine months of 2017. The most contribution to the economic growth was made by trade sector. The economic growth made up 3% in trade section of non-oil sector, 3.1% in non-oil industry, 2.8% in agriculture, 2.4% in non-commercial sector, 2.1% in trade, 3.2% in tourism, 6.2% in communication and information”.


The bank thinks that diversification of export, replacement process of the import, rise in oil price provide improvement of foreign sector indicators of Azerbaijan: "Surplus of foreign trade balance made up $2 billion in the nine months of 2017, up $0.5 billion from previous year. Strategic currency reserves in the ten months of 2017 increased $4.4 billion to $42 billion”


As for monetary condition, the Central Bank said in the condition of the fact that the supply exceeded the demand, fiscal sector’s need for liquidity in national currency affected the monetary condition. Therefore, manat monetary based increased 8.5% in the ten months of 2017.


Another significant factor affecting the monetary condition is continuation of accumulation of liquidity in the banking sector.


Underlining 13.7%-inflation in the ten months of 2017, the bank said that the dynamics of prices has been changed by the factors such as inflation import, changes in prices of goods and services set by the state, inflationary expectations, volume of supply on separate products.


Parameters of the interest corridor will be discussed at the next meeting to be held on February 15, 2018.