October 30, 2018 / 10:48 AM / a year ago

UPDATE 1-Azeri central bank cuts key rate, signals more cuts next year

(Adds details, quotes)

By Nailia Bagirova

BAKU, Oct 30 (Reuters) - Azerbaijan’s central bank lowered its key interest rate to 9.75 percent from 10 percent on Tuesday after inflation fell sharply, its fourth cut this year, and Governor Elman Rustamov said borrowing costs may fall further in 2019.

The central bank also adjusted its rate corridor, setting a lower boundary of 7.75 percent and an upper boundary of 11.75 percent, compared to 8 and 12 percent previously.

The key rate was 15 percent at the start of 2018.

Rustamov said it could be cut further next year if inflation expectations are anchored.

“If we can lower inflation and stabilise inflationary expectations then next year the rate cut can continue,” Rustamov told reporters.

He said the central bank now expects inflation to be 3-4 percent at the end of this year, lower than an initial forecast of 6-8 percent. Annual inflation was 2.6 percent in January-September.

Rustamov said global conditions affecting the Azeri economy had improved this year as oil prices have increased, and non-oil exports have also risen, although growth remains low.

Foreign exchange reserves were $5.537 billion at the end of October compared with $5.534 billion a month earlier, Rustamov said.

“The central bank is cautious about the use of foreign exchange reserves and does not use them in order to maintain the national currency,” he added.

The next meeting of the Azerbaijan’s central bank board will be at the end of December. (Reporting by Nailia Bagirova Writing by Maria Tsvetkova and Polina Nikolskaya Editing by Catherine Evans)

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