Why interest rates change
Policy affects borrowing costs, saving, demand and expectations. It does not order shops to change prices directly; transmission through the economy takes time.
FinFly Explains / Economy
Inflation targeting: a goal, not a price promise
The central bank directs monetary policy towards a stated inflation objective. The target concerns price growth, not a fixed price for every purchase.
The target is not the observed rate
External shocks can temporarily push inflation away from its objective. The Bank of England explains its policy using a 2% target. This is a UK example, not Azerbaijan’s target.
FinFly illustration
If annual inflation falls from 6% to 3%, the overall price level still rose relative to the previous year. Slower inflation does not restore previous prices or imply identical movements for every product.
Assessing a decision
Check the stated objective, forecast horizon and regulator’s explanation of risks together. One policy decision cannot precisely predict your loan rate or when the target will be reached.
Method
Primary sources
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