Under the baseline scenario, the forecast that annual inflation will remain within the target range by the end of 2026 and 2027 remains unchanged. However, analysis of recent trends indicates a possibility that the inflation forecast for 2026 may be revised upward, APA-Economics reports, citing the Central Bank of Azerbaijan.
It was noted that since the last meeting, there has been an activation of factors that could have an upward impact on the balance of inflation risks:
“The escalation of regional tensions into a more acute phase is increasing the volatility of prices and indices in global commodity and financial markets. In this context, the main external risk is related to the pass-through of import prices to domestic inflation. Disruptions in global oil and gas supply chains, rising energy prices, and increasing logistics costs may lead to higher inflation among trading partners. The risk of import price pass-through to domestic inflation will depend not only on inflation processes in trading partners but also on the dynamics of the nominal effective exchange rate. Among domestic risk factors, supply-side and cost-related factors remain significant.”
