Tuesday, November 12 2013 17:52
Armenia's Central Bank reduces refinancing rate from 8.5% to 8% (Full Version)
ArmInfo. The Central Bank of Armenia decided on Tuesday to reduce the rate of refinancing from 8.5% to 8%. The press service of the CB reports that the deposit rate has been reduced from 7% to 6.5%, with the lombard repo rate lowered from 10% to 9.5%.
The source says that 0.3% inflation was registered in October 2013 (versus 1.2% inflation in October 2012), with the annual inflation declining to 7.1% by late October. The inflation drop was mostly due to toughened monetary conditions and the economic growth rates, which were lower than expected. The CB Council thinks that inflation will keep on dropping within the next few months and prove that expectations are mostly justified.
The CB Council states that the world economic growth rates are still recovering slowly, and alongside with this, deflationary tendency has been formed on the international raw materials market and food market. Under these conditions, no inflationary pressure is expected from the foreign sector within the anticipated outlook.
According to the CB Council, the slowdown in Armenia's economic growth over the past 9 months was characterized by the added value reduction in the construction sector and growth in energy tariffs, which contributed to creation of high inflationary environment. The fiscal policy conducted by the Government of Armenia since early 2013 formed low domestic demand. However, a more expansive fiscal policy has been conducted since Q4 2013 and will still be going on throughout 2014.
The CB Council thinks that the current weakening of monetary conditions is adequate to the slowdown of economic activity and dampening of the inflationary environment. In the future the change of the monetary conditions will depend on the course of the fiscal policy.
The Council thinks that within the frames of the expected economic development the annual inflation will be dropping faster than forecasted and will return to the target level by mid 2014.
The last time the CB reduced the refinancing rate was Apr 12 2011, when it was lowered from 8.5% to 8%. On Aug 13 2013 the CB brought it back to 8.5% so as to curb inflation and to cushion the effects of raised energy prices. On Aug 13 2013 the deposit rate was raised from 6.5% to 7%, while the lombard repo rate was left unchanged at 10%.
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