CBA raises Azerbaijan's inflation forecast for 2026, 2027

Annual inflation in Azerbaijan is expected to stand at 6.1% in 2026 and 5.8% in 2027 under the baseline scenario, Report informs, citing the Central Bank of Azerbaijan, CBA.

Previously, the CBA said annual inflation was expected at 5.9% in 2026 and 4.5% in 2027.

"Annual inflation is within the target range and is moving in line with the forecast trajectory under the baseline scenario. In June 2026, 12-month inflation stood at 5.8%. Annual price growth was 7.1% for food products, alcoholic beverages and tobacco products, 5.6% for paid services and 3.8% for non-food products. Annual core inflation stood at 5.5%," the CBA said.

The bank said annual inflation is expected to return to the target from the second half of 2027. It noted that the expected deviation of inflation from the target by the end of 2026 is within the forecast error margin.

According to the CBA, the upward revision of the inflation forecast is mainly due to stronger effects from direct and indirect external cost factors, which are not expected to be persistent in the medium term.

The bank said risks remain high that rising energy and food prices amid a more complex global geopolitical environment could increase imported inflation from Azerbaijan's trade partners. The pass-through of inflation in partner countries to domestic prices will also depend on the strengthening dynamics of the manat's nominal effective exchange rate.

The CBA said possible changes to its inflation forecasts in the coming period will mainly depend on the extent to which these risks materialize. It added that domestic demand factors are not likely to create inflationary pressure under the current fiscal and monetary policy conditions.