OREANDA-NEWS. January 12, 2011. Central Bank of the Republic of Azerbaijan continues series of measures to improve the framework of monetary and exchange rate policies. Various options of exchange rate of the manat targeting have been considered to that end. Macroeconomic analyses demonstrate that, USD/manat bilateral exchange rate targeting is in better harmony with goals of the Central Bank, particularly the target to affect inflation level under the current environment. This mechanism along with being favorable from communication point of view amplifies opportunities of the Central Bank to switch to floating exchange rate regime in a long run.

As is known, since March 2008 the Central Bank has been implementing its exchange rate policy through targeting of currency basket with EURO and USD. In past period this mechanism increased opportunities for management of multilateral exchange rate through transmitting processes in the global FX markets to the local exchange rates. However, new situation characterized with recent further sharpening of volatility in the exchange rate of leading currencies, simultaneous undervaluation of national currencies by developing economies and priority given to financial stability have necessitated amendments to be made to the tactics of the exchange rate policy.

Given the above, the Management Board of the Central Bank took a decision to move to bilateral USD/manat targeting from 10 January 2011 within the framework of improvement of exchange rate policy implementation mechanism.