Central Bank of Azerbaijan may reduce discount rate

Central Bank of Azerbaijan may reduce discount rate Dollarization of deposits forecasted to fall to 50% by year end
April 14, 2017 14:53
Central Bank of Azerbaijan may reduce discount rate

Baku. 14 April. REPORT.AZ/ The Central Bank of Azerbaijan (CBA) may begin to reduce the discount rate in summer months. Analytical Group of Report News Agency says that the CBA can consider the possibility of lowering interest rate against background of the US-dollar stabilization, growth in oil prices on world market, adaptation of Azerbaijan to new economic conjuncture and restoration of financial stability. Notably, last time the CBA raised the discount rate from 9.5% to 15% on September 14, 2016.

Report informs, optimization of money supply gradually reduces demand for US-dollar. According to Azerbaijan State Customs Committee (SCC), imports in the first quarter of 2017 decreased by 17.1% compared to same period last year. At the same time, exports increased by 49.2%.

"But it should be noted that if the dollar rate stabilizes at 1.70 AZN/USD, on this background, Central Bank will pay a high yield (15%) on deposit auctions and notes, and commercial banks payments on deposits will become impossible. It will lead to a gradual denial of population from dollar assets", analysts noted.

The analytical group predicts a decrease in the level of dollarization of deposits from the current 80% to 50% by the year end. With the beginning of lower interest rates, population will begin to place long-term deposits at higher interest rates, as a result of which commercial banks will resume lending in manats.

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