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Armenia’s CB leaves refinancing rate unchanged at 8%

YEREVAN, June 26. /ARKA/. The Board of the Central Bank of Armenia decided Wednesday   to leave the current eight-percent refinancing rate unchanged, the regulator’s press office reports.

In May, Armenia reported a 0.02-percent deflation against 1.3 percent a year earlier. As a result, a twelve-month inflation climbed to 5.2% in May.

The board has concluded the global economic slowdown tendencies are still real thus strengthening deflation at the main international raw and food markets. Bearing these factors in mind, the external sector will be characterized through slow recovery of the global economy and non-inflationary effects.

As to the Armenian economic developments, the real consumption continued falling due to the gradual extinction of agricultural supply shock accompanied by more restricted, than expected, tax and budget policy of the government.

As a result, the domestic demand can’t have inflationary impact on inflation.  The deflation factors appear here as expansion of inflationary environment in the second quarter given the negative developments in the agro sector due to the bad weather conditions, as well as expectations for inflation.

It resulted in less, than forecasted, drop of prices for food products, and the Central Bank anticipates the half of the year will close at higher than expected 12-month inflation rate.
“Bearing in mind the fact that the temporary supply shock begot high inflationary environment, the CB Board decided it would be rational to leave the refinancing rate unchanged. It will allow to hold back inflationary expectations and support economic activity. Lowering the mandatory AMD reserving allowed the Central Bank to ensure dram liquidity in economy. In turn, it also contributed to boosting economic activity,” according to the source.
At the same time, the CB is ready to react to inflationary expectations raised by higher energy tariffs since July, and their effects.

The Central Bank anticipates a 12-month inflation will have approached 4% by early second half, and the economic growth will be balanced.

Last time the Central Bank changed its key refinancing rate on 6 September 2011, from 8.5% to 8%. —0-

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