YEREVAN, December 9. /ARKA/. The Eurasian Development Bank (EDB) expects that the recent change in the inflation target may lead to a more cautious policy by the Central Bank in the near future.
In the state budget of Armenia for 2025, approved on December 4, the 12-month inflation target is set at 3%, with an acceptable range of ±1 percentage point. The Central Bank decided to lower the target, which had been in effect since 2006 at 4% (±1.5 percentage points), considering that the Armenian economy is ready to transition to a new stage of development.
“Lowering the inflation target will help reduce interest rate-related costs and contribute to lower inflation, which is crucial for calculating the real cost of investments. Additionally, the reduction in the target will strengthen the purchasing power stability of long-term savings,” the EDB said in its weekly macro review.
According to the Central Bank’s estimates, reducing the inflation target will have a positive impact on mitigating fluctuations in the financial and currency markets, increasing the purchasing power of the population’s income, and enhancing the country’s investment attractiveness. It will ensure low, stable, and less volatile inflation, contribute to a more stable macroeconomic environment, and reduce the likelihood and impact of future economic crises.
Earlier, the Chairman of the Central Bank of Armenia, Martin Galstyan, stated that the regulator “has built up enough muscle to achieve this” in reducing the inflation target from the previous 4% to the current 3%.
In November, the 12-month inflation rate was 1.4%. According to the Central Bank’s monetary policy report for the third quarter of this year, inflation in Armenia is expected to be between 2.1% and 2% by the end of 2024. The forecast for 2025 is 4% to 3.2%, for 2026 – 4.2% to 3.8%, and for 2027 – 4%.
