YEREVAN, November 26. /ARKA/. The Central Bank of Armenia has the institutional capacity to reduce the inflation target to 3%, said Umang Rawat, the IMF (International Monetary Fund) Resident Representative in Armenia.
“When implementing such a policy change, it is crucial that those who develop and implement it communicate their objectives,” he said in response to a question from the ‘’ARKA’’ news agency.
Rawat noted that the IMF had discussed this issue with both the Central Bank and the Ministry of Finance of Armenia.
According to him, the global change being implemented by the Central Bank as part of its policy is important.
“General changes on transparency, increased trust, and the performance the Central Bank has demonstrated in the context of price stabilization since the adoption of the inflation targeting system are being taken into account,” he explained.
The IMF Permanent Representative also noted that such developments are of a global nature: as inflation targeting systems are developed and established, the inflation target begins to decrease. This happens because, on one hand, experience in inflation targeting is gained, and on the other, opportunities for anchoring inflation expectations are expanding.
Since January 1, 2006, the Central Bank of the Republic of Armenia has been implementing monetary policy under the inflation targeting strategy. Currently, the inflation target is set at 4%, with an acceptable range of ±1.5 percentage points. The Central Bank thinks that the Armenian economy is ready for the next stage of development, and one of the key steps is transitioning to a lower inflation target of 3%.
According to the Central Bank’s estimates, reducing the inflation target will positively impact mitigating fluctuations in the financial and currency markets, increasing the purchasing power of household incomes, and enhancing the country’s investment attractiveness. It will ensure low, stable, and less volatile inflation, help maintain a more stable macroeconomic environment, and reduce the likelihood and consequences of future economic crises.
Earlier, the Chairman of the Central Bank of Armenia, Martin Galstyan, stated that the regulator is considering lowering the inflation target from the current 4% to 3%, as it has ‘’built up enough muscle for this’’.
