YEREVAN, 11 June. /ARKA/. Armenia’s Central Bank remains quite conservative on rate cuts, given the protracted period of deflation/low inflation, Freedom Broker Armenia CEO Hovak Hovakimyan said in comments to ARKA news agency on the Central Bank’s decision to cut the refinancing rate again.
“On 11 June, the Central Bank of Armenia lowered the refinancing rate by 25 basis points. This decision was quite expected. The current reduction is already the 9th since last June. Except for the CB Board meeting in September 2023, when the rate was reduced by 50 basis points, the other reductions were within the standard fluctuation of 25 basis points,’ he noted.
Hovakimyan said the Central Bank’s conservatism may be partly due to an overheating property market, but in that case the regulator may tighten credit conditions.
“Separately, we still believe that interest rates in the country are high and the exchange rate of the dram is expensive. At a lower exchange rate of the dram, inflation may accelerate due to the high import share, but the growth rate of imports may decline and exports may increase. In fact, the current high exchange rate of dram stimulates the growth of imports and restricts exporters,’ he noted.
Freedom Broker Armenia CEO believes that the impact of the rate cut on the exchange rate will be limited.
The rate cut should also have a moderately favourable impact on consumer activity and economic growth in the country as a whole,’ he concluded.
Earlier, Chairman of the Central Bank Martin Galstyan told ARKA news agency that potential ‘overheating’ of prices in Armenia’s real estate market in a bad scenario could reach up to 30%.
Speaking about the consequences, he noted that if a very bad scenario is realised, the development of events can be quite unpleasant.
In early February this year, Armen Nurbekyan, Deputy Chairman of the Central Bank, said that the volume of mortgage loans equalled the volume of consumer loans for the first time, exceeding AMD 1 trillion.
The state budget for 2024 sets inflation at 4 per cent (±1.5 per cent). -0-
