Azerbaijan’s central bank raised its benchmark interest rate for the fourth time, saying inflationary pressures have continued to rise and “the country’s economy will face unprecedented inflationary pressures.”
The Central Bank of the Republic of Azerbaijan (CBA) raised its discount rate by 25 basis points to 7.50 percent and has now raised it 1.0 percentage points following earlier rate hikes in September, October, December and today.
The lower limit of CBA’s interest rate corridor is now 6.0 percent and the upper limit 9.0 percent.
”According to the Central Bank’s baseline forecast, inflation is expected to approach the upper limit of the target range by the end of 2022 and the center of the target range in 2023,” CBA said.
Azerbaijan’s inflation rate rose to a 2021-high of 6.7 percent in December from 6.2 percent in November and 3.3 percent in January.
CBA, which targets inflation of 2.0-6.0 percent, forecast inflation in 2022 between 6.6 and 7.1 percent before decelerating into the bank’s target range in the first quarter of 2023.
CBA said the level of inflation is affecting inflation expectations, with households’s expectations topping its forecast and inflation expectations by businesses are also rising.
”As the pandemic continues and the effects of price liberalization imposed by government regulation continue, rising domestic producer prices are also fueling the costs factors in inflation,” CBA said, estimating the impact of government-regulated prices on inflation exceeds 20 percent.
Economic activity in Azerbaijan topped expectations in 2021, with gross domestic product estimated to have expanded 5.6 percent in real terms, including 7.2 percent in the non-oil sector.
From the beginning of the third quarter, the country’s output exceeded its level prior to the COVID-19 pandemic, employment continues to approach the level prior to the pandemic and the loan portfolio of commercial banks rose 17.7 percent in 2021.
CBA also said the dollarization of the country’s economy is continuing to decline, with deposits denominated in U.S. dollars down 9.8 percentage points to 41 percent and loans in dollars down 4 percentage points to 25.8 percent.
The central bank also said it had maintained a balanced foreign exchange market, ensuring a stable exchange rate so external inflation is neutralized, and its interventions in the currency market amounted to US$245 million last year.
Source:
http://www.centralbanknews.info/2022/01/azerbaijan-raises-rate-4th-time-rising.html
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