Azerbaijan's Central Bank Keeps Key Interest Rate at 6.5%: Inflation Falls to 5.5% in September
6.5%: That is the level at which Azerbaijan’s key interest rate remains. The central bank left it unchanged on October 29. The interest rate corridor remains at 5% to 7.5%. The next decision will be made on December 23.
Inflation is within the target range
Annual inflation fell to 5.5% in September. That is 0.2 percentage points lower than in August. Core inflation stands at 4.9%. Prices for food, alcohol, and tobacco rose by 6.9%, paid services by 5.1%, and non-food goods by 3.6%.
The central bank’s target is 4% plus or minus 2 percentage points. In its statement, it writes: “Annual inflation is within the target range of 4 ± 2% and is in line with the forecast path of the baseline scenario.”
The central bank expects inflation to be 5.9% at the end of both 2026 and 2027. The forecast for 2026 was lowered by 0.2 percentage points from the previous 6.1%. For 2027, it raised the forecast by 0.1 percentage points from 5.8%. It cites rising energy and food prices among its major trading partners as a risk.
Current Account and Reserves Support the Currency
The central bank raised its forecast for the current account surplus. For 2026, it expects $8.5 billion, more than 10% of economic output. For 2027, it anticipates US$5.4 billion, more than 6%. Foreign exchange reserves rose by 33.4% to US$15.4 billion in the first nine months.
Net remittances from abroad increased by 70% compared with the same period last year, reaching US$830.5 million. The share of dollar deposits fell by 3.3 percentage points over the past twelve months to 25.7%. The banking sector holds a liquidity surplus of 6.2 billion manat, 2.2 times the figure at the end of 2025.
Economic growth, however, remains weak. The State Statistics Committee reported a 1.5% year-over-year increase in economic output for January through September. The oil and gas sector contracted by 1.2%. The rest of the economy grew by 2.6%.
Foreign trade continues to generate surpluses. The trade balance closed the first nine months with a surplus of 10.5 billion U.S. dollars. The European Bank for Reconstruction and Development (EBRD) expects growth of 2% for 2026 and 2.5% for 2027. According to the EBRD, fixed investment rose by 10.7% in the first seven months. Average inflation during this period stood at 5.7%.
The financial environment remains predictable for German exporters. The official exchange rate is 1.70 manat per U.S. dollar, and reserves of 15.4 billion U.S. dollars support the country’s ability to pay for imports. Financing costs will not change before December. Those supplying customers outside the oil and gas sector are seeing 2.6% growth—not a boom.
Sources: Central Bank of Azerbaijan (EN), State Statistical Committee of Azerbaijan (EN), Trend (EN), APA (EN), 1news.az (EN)
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