Azerbaijan Central Bank updates inflation forecast

Annual inflation in Azerbaijan is expected to be around 5.3% in 2025 and 4.3% in 2026, according to the updated forecasts by the Azerbaijan Central Bank (CBA), Report informs, citing the bank.

In January 2025, the CBA announced that annual inflation would be around 5.5% in 2025 and 3.8% in 2026.

"Overall, the current monetary policy is aimed at maintaining inflation within the target range and stabilizing inflation expectations. As a part of the current policy, the forecast that annual inflation will remain within the target range (4±2%) in 2025 and 2026 under the baseline scenario remains unchanged," the CBA stated.

Moreover, the bank revealed that in recent months, there has been increased volatility in external factors affecting inflation. According to the International Monetary Fund (IMF), last month the commodity price index decreased by 2.7% on a monthly basis, but increased by 2.6% on an annual basis.

In March, the weighted average annual inflation of trading partners was 9.6% compared to the same month last year. Over the past year, the nominal effective exchange rate of the manat for the non-oil-gas sector has strengthened by 1.8%.

"Changes in the risk balance of inflation are mainly related to the external environment. The expansion of trade wars and continued geopolitical tensions further increase price volatility in international commodity markets. Mutual tariff increases not only weaken global trade but also increase the risk of instability in financial markets. Cost factors and excessive growth in aggregate demand can be noted as internal risk factors that could increase inflation. Also, the possible effects of credit activity on price stability are constantly monitored. Overall, the share of internal factors in inflation forecasts for 2025-2026 is assessed as low," the CBA noted.