"The Central Bank of Azerbaijan (CBA) should further strengthen the transmission mechanism of monetary policy," says the forecast of the International Monetary Fund (IMF), APA-Economics reports.
It was noted that the new liquidity management tools introduced in 2022 have helped improve the transmission of the policy interest rate to the interbank interest rate. Activity in the unsecured interbank market has increased, and since November 2023, the average interest rate for overnight unsecured operations (1D AZIR) has remained within the CBA’s interest rate corridor. The Central Bank has also made progress in monetary policy communication, including starting to publish its forecasts. Authorities should continue to build on these achievements and further strengthen the transmission mechanism of monetary policy: “This includes simplifying interbank operations in secured markets and enhancing the level of monetary policy communication.”
The IMF emphasized that these steps should enhance the effectiveness of monetary policy, strengthen confidence in the national currency, and lay the groundwork for a transition to a hybrid inflation targeting regime in the medium term. At the same time, closer coordination is also required between the government's debt management operations and the CBA’s liquidity management.
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