CBA: Inflation was reduced to some extent by appreciation of nominal effective exchange rate

Inflation was reduced to some extent by the appreciation of the nominal effective exchange rate in Azerbaijan, the Chairman of the Central Bank of Azerbaijan (CBA), Taleh Kazimov, told Global Finance, Report informs.

“Our analysis showed that prices in the domestic market were elevated due to external supply factors. It is quite clear that the central bank will be less efficient in curbing externally driven inflationary pressure with monetary policy tools. During this time, Azerbaijan imported inflation from key trading partners, some of which have been significantly hit by high global food and energy prices. Our main strategy was to ensure that demand factors were under control by increasing the policy rate. Additionally, we maintained the stability of local currency in periods of excessive foreign currency supply,” Kazimov said.

‘Oil revenue does not directly affect inflation through the aggregate demand channel. According to the institutional framework, the State Oil Fund (SOFAZ) receives all oil and gas revenue and transfers the predefined amount of that revenue to the state budget in accordance with the fiscal rule,” the CBA chairman said.