YEREVAN, August 13. / ARKA /. Armenia’s Central Bank has decided today to raise its key refinancing rate by 0.5 percentage points to 8.5%. It said in a statement that the 0.4% inflation recorded in July was prompted by an increase in electricity and gas prices, while a year ago the inflation dropped by 1.5%. This year’s rise led to an 8.5 percent annualized inflation rate, it said.
“The Central Bank’s decision (to raise the key rate) is aimed at mitigating the secondary impact of increased electricity and gas prices. Besides, the Central Bank Board is eager to preserve the real positive interest rates. The CB’s policy is expected to ease the inflation gradually over the next months. The Central Bank will respond to gradual decline in inflation rate and a possible slowdown in economic growth by loosening its monetary policy terms”, the CB said.
The Central Bank said also it believes that the external sector is within the projected frame. According to it, the slowing global economic growth tendency continues as commodity prices show a certain deflationary trend. These processes suggest that no additional inflationary pressures from the external sector are expected, the Central Bank said.
According to the Central Bank, economic developments in the country in the first half of the year formed a higher than expected inflation, escalated by developments in the agricultural sector in the second quarter, when it was affected by hailstorms and a rise in prices for some services.
“The Central Bank Board believes that inflation will be gradually declining to the target level and remain there within the permissible fluctuation band”, it said.
According to the National Statistical Service, the first half inflation rose by 4.1% year-on-year. The government inflation projection for this year is 4%. (± 1.5%). The last time the Central Bank revised its refinancing rate was in 2011 September, when it cut it by 0.5 percentage point to 8 percent. -0-
