Finance

Home page

Finance

FS: CBA to reduce interest rate by 6,75% this year

28 February 2025 16:50 (UTC +04:00)

The Central Bank of Azerbaijan (CBA) will reduce the interest rate to 6.75% this year", this was stated in the forecast of Fitch Solutions (FS), a company belonging to the Fitch Group, APA-Economics reports.

Justification of Fitch Solutions

Fitch Solutions justifies it in this way: "Over 2025, we believe that private consumption, while remaining supported on the back of falling unemployment rate (5.3% as of Q3 2024), will somewhat slow due to a gradual fall in real wages."

Inflation and consumer expectations

It is expected that inflation increases moderately in 2025. We attribute this increase in prices to general demand health and, as such, this will not be something that the Central Bank of Azerbaijan will be concerned about. Instead, we expect monetary easing to continue in 2025, with the headline refinance rate moving from 7.25% currently to 6.75% by the end of the year;

The effects of the reduction of the interest rate

Fitch Solutions believes that if it decreases CAB’s interest rate to the level of 6,75%, this would be the lowest level that it has reached in over five years. Reducing the interest rate will arguably foster both consumption and investment growth.", FS added.

Alternative forecasts and the future decision of the CBA

Note that the Dutch financial corporation ING Group had previously predicted that the Central Bank of Azerbaijan would increase its interest rate from 7.25% to 7.50%.

Recall that since May of last year, the Central Bank has kept the interest rate stable at 7.25%. The Central Bank will announce its next decision regarding the interest rate on March 12 of this year.