By AZE.US
Will loan rates rise, will deposit returns change, and what is next for the manat? Azerbaijan’s Central Bank is due to announce its next interest rate decision on September 23, putting those questions back in focus.
The refinancing rate currently stands at 6.5%, with the interest rate corridor running from 5.5% to 7.5%. The bank last changed those parameters in February, cutting them by 0.25 percentage point. It left them unchanged on July 31 and scheduled the next announcement for September 23.
What It Could Mean for Loans and Deposits
Economist Günay Hüseynova told Globalinfo.az that she does not expect a sharp rise in loan rates under current conditions. She said the central bank’s decisions could also affect deposit yields. Her comments are a forecast, not an announcement of new rates by commercial banks.
A policy rate can influence funding costs, but banks set their own loan and deposit offers according to costs, risk, product terms and competition. Existing contracts do not automatically change when the central bank acts; their terms determine whether a rate is fixed or variable.
The Dollar and the Manat
The official exchange rate on September 22 was 1.70 manats per U.S. dollar, according to the Central Bank. Hüseynova identified a sharp fall in oil prices or a major external crisis as possible longer-term risks for the manat. She did not predict an imminent devaluation.
The central bank said foreign currency supply exceeded demand in August, when it bought $1.5 billion on the market. That describes conditions in August; it is not a guarantee about future exchange rates.
Prices Remain a Concern
Annual inflation reached 5.7% in August, while food, beverages and tobacco prices were 7.2% higher than a year earlier, according to state statistics. A stable dollar exchange rate therefore does not mean consumer prices have stopped rising.
The U.S. Federal Reserve added to the debate on September 16 when it raised its target range to 3.75%-4%. For borrowers and savers in Azerbaijan, the more immediate reference point is the local central bank’s September 23 decision and the rates banks offer afterward.
AZE.US