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Armenian central bank may raise benchmark interest rate again in near future

YEREVAN, April 1. /ARKA/. The 12-month inflation in Armenia will remain above the projected target, then will gradually decline and stabilize around the target of 4% according to a Central Bank report.

It says the medium term inflation will be driven by supply factors, due to inflationary pressures imported from the external sector through a number of goods, as well as demand factors, mainly due to the expected positive developments in the tourism sector.

With this in mind, the Central Bank had earlier raised the refinancing rate to 9.25 percent – up by 1.25 percentage points, citing uncertainty and risks for the country’s economy related to crippling Western sanctions imposed against Russia.

According to the report, the regulator also believes that if these uncertainties and risks of increasing inflationary pressures persist it may consider another rise of the benchmark interest rate in the near future.

“In the medium term, with monetary policy implemented to date, inflation will gradually decline and stabilize around the 4% target,” the report said.

The risks of inflation deviating from the expected trajectory are balanced, and in case of any such manifestation the CB is ready to respond adequately to ensure medium term price stabilization.

The 12-month consumer inflation rate in February 2022 compared to January 2021 was 6.5%, while prices rose by 6.8% in January-February 2022 compared to the same period in 2021.

Earlier, CB revised its economic growth forecast for Armenia for 2022 from 5.3 percent down to 1.6 percent.  The government’s growth projection for 2022 is 7%, and the inflation is set at 4% (± 1.5%).-0-

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