In 2025, the monetary policy of the Central Bank of Azerbaijan (CBA) will focus on ensuring price stability, which is its main mandate, and stabilizing inflation within the established target, Report informs referring to the CBA's statement on the main directions of monetary policy for 2025.
According to the statement, reforms to improve the monetary policy structure will continue. In accordance with the "Strategy of Socio-Economic Development for 2022-2026," the monetary policy goal for the next year remains to maintain annual inflation at 4±2%. As in previous years, the target indicator will be the change in the consumer price index over the past 12 months, calculated by the State Statistics Committee. According to the latest CBA forecasts (October 2024), annual inflation in 2025 will be around 5.8%, which corresponds to the established target.
The CBA will continue to regularly update its inflation forecasts based on comprehensive analysis of inflation factors. Simultaneously, the assessment of inflation expectations will continue. Price stability continues to face several external and internal risks. In the external environment, commodity price dynamics in global markets, inflation processes, and economic activity in partner countries will affect domestic inflation. High volatility of these factors is expected against the backdrop of ongoing geopolitical tensions. Internal risks include possible excessive expansion of aggregate demand, changes in state-regulated goods and services tariffs, and rising inflation expectations.
In 2025, the currency channel is expected to continue playing a key role in monetary policy transmission. The manat's nominal effective exchange rate will remain one of the significant factors affecting imported inflation. According to recent calculations based on international analytical centers' forecasts for bilateral rates, the manat's nominal effective exchange rate will continue to strengthen in 2025. Next year, the CBA's interest rate corridor will be one of the main tools for influencing monetary conditions in the economy. Decisions on the interest rate corridor will be made considering changes in the risk balance of internal and external inflation factors, as well as updated macroeconomic forecasts.
As in previous years, discussions of the interest rate corridor in 2025 are planned according to a pre-approved schedule of CBA Board meetings. In the coming year, the CBA will continue to focus on developing analytical and forecasting capabilities. Within the policy analysis and forecasting system, modeling tools will be regularly improved based on best practices, and research depth and coverage will be expanded. Cooperation with public and private organizations will continue to increase coverage of alternative statistical databases.