Azerbaijan’s monetary policy is aimed at finding a ‘golden mean’ between curbing inflation and economic growth. Unlike most developing countries, the “fiscal phase” of Azerbaijan creates more opportunities for solving this problem, in particular for maintaining social well-being, Vusal Gasimli, executive director of the Center for Analysis of Economic Reforms and Communications, told Report.
Commenting on the decision of the Central Bank of Azerbaijan on interest rate corridors, he noted that the Central Bank is tightening monetary policy by raising the nominal interest rate in an effort to reduce aggregate demand and inflation.
“Most reputable institutions, including the International Monetary Fund and the World Bank, are suggesting that inflation, which accelerated in 2021, will remain high in 2022 in both developed and developing countries, and will slow down only in 2023,” he said.
According to Gasimli, inflation in Azerbaijan also exceeded the upper limit of the target corridor - 6%, amounting to 6.7%: “But when compared with Russia, Turkey, Europe and the US, inflation in Azerbaijan slightly deviated from the target corridor. Nevertheless, the Central Bank of Azerbaijan is trying to return inflation to the target corridor and consolidate it.”
The increase by the Central Bank of the discount rate to 7.25% in September, October and December last year, first of all, affected the short-term money market. The rate increase doesn’t affect the market directly, but indirectly.