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Armenia’s central bank to continue easing monetary policy in the first quarter of 2017

YEREVAN, February 27. /ARKA/. Armenia’s Central Bank said it will continue the easing monetary policy in the first quarter of 2017. The decision is prompted by the restrained fiscal policy of the government in 2017 as compared to the previous year, the regulator said in a report on inflation in the 4th quarter of 2016.

The Central Bank noted that its assessment of the inflation rate was revised downwards at the end of 2016, mainly due to the revision of the natural inflation forecast in conditions of negative GDP gap and expectations of low prices for some non-food goods.

Another factor that prompted the inflation rate revision is a decrease in electricity prices, whose overall impact on inflation is estimated by the Central Bank at minus 0.3 p.p.

It is important to note that in January 2017 the natural gas price for households, as expected, fell by 5.25% (its contribution to inflation is estimated at 0.32 p.p.).

In these circumstances, the Central Bank predicts a gradual neutralization of the deflationary environment until the end of the year. As a result, the projected 12- month inflation will reach slowly the target band.

According to the National Statistical Service, the average annual deflation in 2016 amounted to 1.4%. From the second half of 2015 the Central Bank has reduced the refinancing rate 12 times – from 10.5% in June 2015 to 6% in February 2017. The inflation rate projected by the 2017 budget is 4% (± 1.5%). -0-

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