Money supply growth in Azerbaijan is not putting significant pressure on inflation, said Azer Alasgarov, Executive Director of the Central Bank of Azerbaijan (CBA), Report informs.
According to him, the CBA's foreign currency purchases are contributing to money supply growth: "We are also seeing an increase in the volume of money supply in the monetary market. For example, over the past year, the M0 monetary aggregate has increased by 12.4%, the M1 monetary aggregate by 17%, and the M2 monetary aggregate by 21.3%. In other words, the rate of money supply growth has accelerated. The positive aspect is that longer-term components of broad money are growing at a faster rate. Specifically, demand deposits have increased by 23%, while the growth rate of time deposits stands at 37.7%."
Alasgarov added that the impact of money supply growth on inflation depends largely on the sources driving that growth and on which components of broad money are increasing more rapidly.
"If broad money grows primarily as a result of foreign currency purchases, this means that the ratio of the CBA's foreign exchange reserves to the money supply is increasing. For example, in December 2025, the ratio of the Central Bank of Azerbaijan's foreign exchange reserves to broad money denominated in manat was approximately 51%, whereas it has now approached 60%," he said.
The director also pointed out that a higher level of foreign exchange reserve coverage of the money supply means that it will be possible to regulate the money supply if a shock occurs:
"On the other hand, the growth of longer-term components also limits the impact of money supply on inflation to some extent. Overall, the growth rates of cash in circulation and broad money have so far remained in line with the nominal growth rate of the economy. We do not currently see these increases creating significant inflationary pressure. As is evident, both actual and projected inflation remain within the target range."