Azerbaijan cuts rate 9th time, more easing if CPI in target

     Azerbaijan's central bank lowered its benchmark interest rate for the 9th time since last February and said the trend toward a neutral monetary policy would continue as long as inflation is expected to remain within the bank's target.
     The Central Bank of the Republic of Azerbaijan (CBA) cut its discount rate by another 25 basis points to 8.25 percent and has now cut it by a total of 675 points since February 2018.
     It is CBA's fifth rate cut this year, with the rate cut 150 basis points, as inflation continues to rise toward the bank's target of 4.0 percent, plus/minus 2 percentage points.
      Azerbaijan's inflation rate rose to 2.5 percent in June, continuing to accelerate from 1.7 percent in January on higher food prices, and CBA said inflation is expected to reach the upper part of its target range by the end of the year due to expanding domestic demand.
      Azerbaijan's inflation rate has come down faster than expected since mid-2017 when it hit 14 percent, triggering CBA's flurry of rate cuts and the inflation target for 2019 was also lowered to 4.0 percent from an earlier 6-8 percent.

     CBA said monetary policy decisions during the remainder of the year will be based on the forecast for inflation, the balance of internal and external risks, especially how fiscal stimulus affects prices.

     Helped by the rise in oil prices earlier this year Azerbaijan's trade surplus has widened, boosting its currency reserves to US$49.1 billion, and both oil and non-oil exports are higher.

      Last month the International Monetary Fund forecast Azerbaijan's economic growth would rise to 2.7 percent this year from 1.4 percent last year, with measures, such as higher wages, pensions and social assistance, providing economic stimulus and protecting the most vulnerable in society.

     The Southern Gas Corridor natural gas pipeline, a European initiative to reduce its reliance on Russian gas, will become operational this year, boosting Azerbaijan's output and the fiscal surplus that is seen rising to 5.8 percent of gross domestic product.

     Azerbaijan's current account surplus is also seen exceeding 10 percent of GDP in the near term, IMF said, calling on continued fiscal consolidation to save oil income for future generations.

     Azerbaijan's economy grew 3.0 percent in the first quarter of this year, up from 1.4 percent in the previous quarter.

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