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Armenia’s Central Bank expects inflation to have significant impact on economy

YEREVAN, June 15. /ARKA/. Armenia’s Central Bank expects the inflation to have a considerable impact on the economy, however, it will not exceed the projected band, chairman of the Central Bank  Martin Galstyan said on Tuesday.

Galstayn’s comment came after the Executive Board of the Central Bank raised the refinancing rate by 0.5 percentage points, setting it at 6.5%.

The last time the Central Bank changed the refinancing rate was on May 4, 2021, when it was raised by 0.5 p.p. to 6%. According to Galstyan, the 12-month inflation in May 2021 dropped to 5.9%.

He said  in the second quarter of 2021, due to the positive effects of the vaccination against coronavirus and the  stimulus policies, Armenia’s partner countries began to see a more active recovery  than expected.

According to him, due to the rapid growth in  global demand and  limited supply opportunities in a number of commodity markets, the high inflationary environment still persists. He added that due to the aforementioned supply and demand factors, higher inflation rates are predicted in partner countries compared to previous estimates.

“In such a situation, the Central Bank Board  expects a significant inflationary impact on the Armenian economy from the external sector,” Galstyan said.

He also noted that the high growth in private consumption is facilitated by more positive changes in lending than expected and the spending of savings accumulated by the population, reflecting their  growing  inflationary expectations.

At the same time, according to him, the Central Bank Board, along with neutralizing the risks of accelerating inflation expectations is considering the need for a possible tightening of monetary conditions in the near future.

“In such conditions, the 12-month inflation is projected to remain high in the short term, and then gradually decline, stabilizing around the projected target of 4%,” Galstyan said.

Armenia’s government’s GDP growth projection for 2021 is  3.2%, while inflation is expected to be  4% (± 1.5%). -0-

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