The monetary policy target will be to maintain annual inflation at 4±2% next year, APA-Economics reports.
This was stated in the Central Bank of Azerbaijan’s statement on the main directions of monetary policy for 2026.
It was noted that as in previous years, the target indicator in the coming year will be the change in the consumer price index, calculated by the State Statistical Committee, over the past 12 months.
Managing inflation within the target range is one of the essential conditions for sustainable economic growth. It is important for protecting the incomes and savings of both households and companies. Stable and low inflation increases confidence in the national currency and its purchasing power, thereby helping to reduce the share of assets and liabilities expressed in foreign currency in the economy. All of this enhances the economy’s resilience to changes in the external environment.
According to the Central Bank’s latest (October 2025) forecasts, annual inflation in 2026 is expected to be 5.7%, which is within the target range. Forecasts from the government, international financial and credit institutions, and international rating agencies also indicate that inflation will largely remain within this range in the coming year.
In 2026, the Central Bank will continue to update its inflation forecasts each quarter based on a comprehensive analysis of inflation factors. At the same time, the assessment of households’ and business entities’ inflation expectations will continue, based on surveys conducted among the population and enterprises.
Next year, when making decisions on monetary policy, the Central Bank will comprehensively evaluate domestic and external factors, as well as risks, that may affect the national economy and inflation.
Overall, in recent years, the share of external factors in the inflation risk balance has increased significantly. In the medium term, this share is expected to remain high. Geopolitical tensions and instability in the global trade environment continue to maintain a high level of uncertainty regarding commodity and financial markets.
The main external risk is related to the pass-through of import prices to domestic inflation. This risk will depend on inflation developments in trading partners and the dynamics of the nominal effective exchange rate. Domestic risk factors, on the other hand, are primarily formed through supply–cost factors.
Over the medium term, a conservative macro-fiscal framework and expected growth rates in credit allocations reduce the risk of excessive growth in aggregate demand.
Taking into account domestic and external uncertainties, the Central Bank will continue the practice of preparing macroeconomic forecasts not only under the baseline scenario but also under alternative scenarios. This will ensure a flexible policy response in the event that inflation risks materialize.
Next year, monetary policy will be implemented within the existing framework. Exchange rate stability will serve as the main anchor of price stability. According to forecasts, a surplus in the current account of the balance of payments next year will support equilibrium in the foreign exchange market. Under the baseline scenario, the current account surplus in 2026 is expected to amount to USD 3 billion, equivalent to 3.7% of GDP.
Next year, the Central Bank will also focus on maintaining its foreign currency reserves in accordance with adequacy criteria and improving their management.
When applying monetary policy instruments, developments in financial markets and changes in the liquidity position of the banking system will be taken into account. The use of these instruments will help neutralize the effects of non-monetary factors on monetary conditions.
The coordination of monetary policy with the Central Bank’s other areas of activity, particularly macroprudential policy, will continue. This coordination will be carried out through the Bank’s internal collegiate bodies, including the Monetary Policy and Financial Stability Committee.
The macroeconomic impacts of climate change and the support of “green finance initiatives” will remain in focus. Assessments of the direct and indirect effects of climate change on inflation dynamics, economic growth, and the financial sector will continue.
Work will continue on defining the policy objectives for the introduction of the Central Bank’s digital currency and on developing the corresponding roadmap. This work includes identifying priority use cases, assessing potential risks and benefits, and preparing a phased implementation plan aligned with a broader strategy for the financial sector.
