YEREVAN, January 18. /ARKA/. Armenia’s Central Bank is very likely to raise soon the key refinancing rate, the local daily ‘Haykakan Zhamanak’ (Armenian Time) says in its today’s issue, adding that if this does happen the move will gradually push up the interest rates on loans provided to businesses and the people. The daily’s forecast is based on a hint which it saw in the latest statement by the regulator.
“By making loans more expensive, the Central Bank will try to curb inflation. In other words, more expensive loans will lead to a slowdown in economic activity, which, in turn, will lead to a decrease in the purchasing power of the population,” the daily says.
It says according to the classical economic rules, if the population’s solvency falls, the inflation rate also decreases. The whole problem is that classical economic rules do not always work in Armenia, according to the pro-opposition newspaper. In particular, in a monopolized economy, prices may go up not because of market factors, but because of ‘the whims of businesses.” In such circumstances, the change of the refinancing rate may lead to serious negative consequences, it says.
On December 26, Armenia’s Central Bank decided to keep its key refinancing rate unchanged at 6 percent. It suspended monetary policy easing in March last year and in 2016 alone it lowered the key refinancing rate 8 times.
Consumer prices in December 2017 increased by 2.6% year-on-year with food products (including alcoholic beverages and tobacco products) rising by 5.3% and non-food products by 1.7%, while services decreased by 0.5%. The government-projected inflation for 2017 is 4% (± 1.5%). -0-
