Monetary conditions continue restraining effect on inflation – CBA

By Trend

Strengthening of manat’s [Azerbaijan’s national currency] nominal and effective rate is the main reducing monetary factor in the decomposition of both actual and projected inflation, Trend reports with reference to the Central Bank of Azerbaijan (CBA).

According to CBA, the monetary base in manat decreased by 5.5 percent, from January through May 2022, in the context of a surplus state budget and activation of sterilization operations by CBA.

"More active usage of required reserve ratios is envisaged in the context of increased inflationary pressure, in order to additionally sterilize excess liquidity," CBA said.

"The entry into force of the amendments to Rules ‘On the Norm, Procedure for Calculating and Holding Required Reserves’ introduced by CBA resolution dated June 6, 2022, creates conditions to make flexible decisions regarding required reserves," CBA noted.

"An increase in required reserves to four percent for deposits in national currency and up to five percent for deposits in foreign currency has a positive impact on the value of liabilities in the banking sector by a total of 0.044 percent," CBA added.