YEREVAN, January 29. /ARKA/. Armenia’s Central Bank has cut today the refinancing rate by 0.25 percentage points to 5.75% in the first revision of the key indicator over the last 24 months.
The Central Bank said the inflation in 2018 December was 1.5%, as a result the 12-month inflation was 1.8%, driven by relatively low prices for seasonal goods and a slight drop in natural inflation. Owing to this, the regulator said, the low inflationary environment will continue into the coming months, while the 12-month inflation will be below the projected minimum level.
The regulator cited also weak signs of global economic growth rates both in advanced and developing countries and the tightening of monetary polices by central banks, saying these trends will preserve in the international markets for basic commodities, based on which Armenia’s Central Bank believes that no inflationary pressures from the external sector are expected in the coming months.
The Central Bank also said it expects the 2018 growth to be within 5%, attributing the weakening of gross demand to the constraining nature of fiscal policy and the slowdown in private spending.
The Central Bank said that low inflation is partly structural in nature, due to long-term economic and political changes , which contribute to maintaining income solvency and stabilizing inflation expectations.
In view of the above-said, the Central Bank said it decided to increase the size of monetary incentives by lowering the refinancing rate by 0.25 percentage points, and to apply long-term liquidity injection tools.
At the same time, in the context of projected macroeconomic developments, there will be a need to maintain incentive conditions for a longer time to ensure price stability in the medium term. As a result, it is expected that inflation will basically stabilize around 4%. The regulator said it closely monitors macroeconomic developments, and, in the event of risks, will adjust monetary policy if necessary to ensure price stability.
The Central Bank has lowered also the Lombard Repo rate to 7.25% from 7.5%. The previous time the regulator reviewed the refinancing rate was in March 2017, when it suspended the easing of monetary policy, setting the rate at 6%. -0-
