Central Bank warns against complexity of transition to inflation targeting
Transition to inflation targeting in Azerbaijan will take at least two years, Chairman of the Central Bank of Azerbaijan (CBA) Elman Rustamov told Trend.
Rustamov believes this is a very complex process that requires interagency cooperation, especially in the financial sector.
"The decisive part of the process is the activation of the inter-bank manat market, because the inflation targeting is implemented through the targeting of interest rates. This is the world practice.The development of the securities market is very important in this issue," the CBA chairman said.
He noted that, in turn, for the development of the securities market it is important to establish trust between banks and to intensify liquidity trade at the initial stage, and this requires a developed collateral market.
"In this regard, recently, we have tremendously expanded the issue of notes. This gives impetus to the development of the inter-bank market. In general, it is necessary to develop the market of government securities. Today, this market is very small," he added.
According to the State Statistics Committee, the inflation in Azerbaijan in January-July 2018 amounted to 2.8 percent. The Central Bank plans to keep the inflation rate at 6 to 8 percent. The CBA Chairman Elman Rustamov said earlier that the inflation will remain below the target by the end of the year.
Many international experts agree that in the context of the global crisis, the inflation targeting has a great advantage due to its greater stability. The inflation targeting helps reduce the volatility of the economy.
Many countries that used inflation targeting before the 2008 crisis did not change it to another monetary policy.