Central Bank Of Azerbaijan Forecasts Inflation Within Target Range For 2026/2027

(MENAFN- Trend News Agency) BAKU, Azerbaijan, February 18. The Central Bank of Azerbaijan (CBA) has put its cards on the table regarding inflation forecasts for 2026 and 2027, expecting annual inflation to stay within the sweet spot of 4±2%, landing at 5.5% and 4%, respectively, Trend reports via the bank.

According to the CBA, the 2026 inflation forecast will be driven upward by household consumption by 1.22 percentage points (p.p.), agricultural producer prices (APP) by 2.48 p.p., inflation in trade partners by 2.09 p.p., and the direct impact of regulated prices by 0.31 p.p., while other factors are expected to add 1.12 p.p. Reducing contributions is expected from government consumption at -0.13 p.p. and the nominal effective exchange rate (NEER) at -1.6 p.p.

For 2027, household consumption is projected to increase inflation by 1.28 p.p., APP by 2.48 p.p., trade partner inflation by 1.79 p.p., government consumption by 0.03 p.p., and other factors by 0.37 p.p., while NEER will contribute -1.96 p.p. to reducing inflation. Budgetary spending in both years is expected to have a neutral effect on overall inflation.

The CBA noted that the realization of these forecasts depends on a range of domestic and external factors. The main external risk comes from rising prices in partner countries, potentially amplified by geopolitical tensions, global market fragmentation, and trade conflicts with tariffs. The dynamics of NEER and global climate changes affecting agricultural productivity could also influence domestic prices. From an internal perspective, there could be inflationary dynamics if local supply-side cost factors escalate.

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