Azerbaijan’s CBA reduces its inflation forecast

The Central Bank of Azerbaijan (CBA) reduced the inflation forecast for 2024 (April forecast: 3.5% for 2024 and 4.2% for 2025), Report informs.

In general, the risks of increasing and decreasing inflation balance each other: "If the current conditions remain unchanged, the annual inflation in 2024 and 2025 is expected to remain within the target (4±2%). In April, the inflation forecast for 2024 was changed in the direction of decreasing," the CBA stated.

"Since the last meeting, the annual inflation rate has continued to decrease. In March of this year, 12-month inflation was 0.4%, and 12-month base inflation was 1%. Annual food deflation was 1.1%, non-food inflation was 1.1%, and service inflation was 2.2%," the statement said.

The CBA believes that the low inflation environment supports the reduction of inflation expectations: "According to the results of the surveys, the share of households expecting inflation to rise in the first quarter of 2024 decreased by 1 percentage point compared to the previous quarter.

The external background of inflation remains favorable. Global inflation has slowed as a result of lower world commodity prices.

According to the World Bank, although the commodity price index increased in March 2024 compared to the previous month, it decreased by 0.3% on an annual basis, including non-energy prices by 2.4%.

According to the UN Food and Agriculture Organization (FAO), the food price index decreased by 7.7% on an annual basis in March. The increase in the nominal effective exchange rate of the manat (19.3% in 2023 and 2.7% in the first quarter of 2024) contributed to the reduction of import inflation.