The increase of the discount rate to seven percent in Azerbaijan isn’t deemed to be high compared to the previous discount rates, but if the Central Bank continues to raise the discount rate, this will affect the rates on deposits in national currency, Azerbaijani MP, economic expert Vugar Bayramov told TurkicWorld
Bayramov was commenting on the decision of the Board of the Central Bank of Azerbaijan (CBA) to increase the discount rate by 0.5 percentage points - from 6.5 percent to seven percent on October 29.
He noted that interest rates on loans may be decreased, as well.
“The policy of the Central Bank is to achieve a reduction of interest rates on loans," added the expert.
According to Professor of the Azerbaijan State Economic University (UNEC) Elshad Mammadov, a sharp rise of interest rates on loans isn’t expected.
“This is because interest rates on loans are already high and there are certain problems in lending. Another reason for not introducing tightening measures in lending is that the liabilities of Azerbaijan's commercial banks have a very low share of loans provided by the CBA,” Mammadov said. “The Central Bank provides banks with funds at a discount rate only for short-term operations, so the real impact [from the increase of interest rate] will be insignificant. In this case, an increase in interest rates on deposits is inevitable. In the coming months they will increase, according to which the Deposit Insurance Fund will make an appropriate decision."
The CBA's decision to raise the discount rate was made on the basis of a forecast of short-term and medium-term inflationary factors, given the influence of increasing inflationary processes in the global economy, especially, the transfer of the growth of prices for food and raw materials, transport and logistics costs, as well as processes of liberalization of regulated prices and tariffs amid growing balanced domestic demand to the national economy.
