Our objective remains unchanged: price stability. Based on our baseline forecasts, inflation is expected to stand at 6.1% by the end of 2026 and 5.8% by the end of 2027.

Axar.az reports that Central Bank Chairman Taleh Kazimov made the remarks in an interview with Global Finance magazine.

He said that although inflation is expected to remain within the target range over the medium term, there are risks of rising inflation driven by supply-side factors.

“The priority is not a change of objective but strengthening and deepening interest rate transmission while preserving exchange rate stability as the primary anchor, with interbank rates as the auxiliary anchor for domestic inflation.

Since September 2022, we have built an active interbank money market from the ground up. AZIR, the overnight unsecured benchmark, has been our secondary operational target for over a year, with the average spread to the policy rate now about four basis points. Last year, the European Bank for Reconstruction and Development issued floating-rate notes referenced directly to AZIR, which is a stronger endorsement.

Kazimov highlighted three main priorities:

We have three priorities: strengthening passthrough to market rates; deepening capital and money markets by expanding instruments referenced to AZIR, including the yield curve; and upgrading forecasting through data analytics and AI. I would add a fourth, easily overlooked: communication. Credibility remains a central bank’s most valuable asset,” he said.

“Strengthening the transmission of policy rates to market interest rates; deepening capital and money markets by expanding the range of financial instruments linked to AZIR, including through the development of a yield curve; and improving forecasting capabilities through the use of data analytics and artificial intelligence."