Azerbaijan's Central Bank keeps discount rate unchanged
Management Board of the Central Bank of Azerbaijan (CBA) passed a decision on August 1, 2017 to keep the discount rate at 15% and other parameters of interest corridor (lower limit of corridor at 10%, upper limit – 18%) unchanged.
The CBA told APA-Economics that restoration of activation of the business in the leading sector of the economy in the condition of deepening macroeconomic stability. In the condition of improvement of foreign balance, balance of currency market is ensured and manat rate is stable. In order to manage liquidity of the fiscal and financial sector on the background of abovementioned trends, the CBA extended its balance and increased the supply of money to the economy. In spite of slackening of inflation expectations, inflation-related risks, especially supply and structural risks have not been eliminated completely.
While passing a decision on parameters of interest corridor, several macroeconomic trends have been taken into account. So, dynamic of indicators of real sector and economic activity continue to restore. On the background of increase of government demand and foreign demand, non-oil sector grew 1.7% in six months of 2017. Economic growth is different in the fields of economy. The growth makes up 3.7% in trade, 5.4% in non-oil industry, 2.2% in agriculture. According to results of monitoring conducted by CBA in real sector, production index in processing and sales index in trade improve. At the same time, consumer confidence increased in the last quarter.
Increase of global oil price compared to forecast and previous year, activation of non-oil export and decline of import led to improvement of indicators of foreign sector. In January-June export increased 36.5%, including non-oil export – 27.9%, import decreased 15.7%. Surplus of foreign trade balance made up $1.9 billion, currency reserves increased.
Despite the monetary condition softened in the second quarter, it was neutral in the reporting period. Monetary base increased more than 6%. This is a factor ensuring stability of payment system and extending crediting opportunities of the economy. However, on the background of significant increase of liquid assets in the banking sector the dynamic of crediting of the real sector shows that this ecosystem needs additional supportive measures.
According to the State Statistical Committee, annual inflation made up 13.9%. Food prices changed 18.1$, non-food products prices – 12.4% and service prices – 9.
Short- and mid-term risk factors have not been fully neutralized although inflation expectations declined.
Parameters of interest corridor will be discussed on September 18.
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