Thursday, November 14 2013 17:15
Chairman of Armenia's Central Bank: Nov reduction of refinancing rate was a response to Aug-Oct decline in inflation
ArmInfo. The Nov reduction of the rate of refinancing was a response to the Aug-Oct decline in inflation, Chairman of the Central Bank of Armenia Arthur Javadyan said in the Parliament on Nov 14, when asked by a group of opposition MPs if the CB was not late with its Nov decision to lower the rate from 8.5% to 8%.
The MPs believe that the CB should have lowered the rate to 7.5% in Jan-Apr when economic growth was 7.4%. "This would have eased the monetary policy and could have stimulated the growth," they said.
Javadyan answered that in early 2013 and even in late 2012 they already knew that the energy tariffs would be changed. "We decided not to change the rate so as not to cause a change in market rates. By the way, at the time when the rate of refinancing was 8% the inter-bank repo rate was 9.5%. But later when we learned when and by how much exactly the energy tariffs would be raised, we saw that the effect to be caused by the rise would be some 2.5-3%. By Aug we saw that inflation was growing, so, we decided to raise the rate from 8% to 8.5%, but we warned that as soon as inflation slowed down, we would have to lower the basic rate too. So, when inflation began to decline from 9.3% in Aug to 7.1% in Oct, we lowered the rate of refinancing from 8.5% to 8% and were forced to reduce the basic rate because otherwise it would be negative," Javadyan said.
He noted that even though today too market rates are higher than the rate of refinancing, he is sure that in Apr-May 2014 inflation will be 4% ( 1.5%). "It may even be lower but in no way higher. That's why in the next year's budget we fixed the same target level. Let me note once again that low inflation is a good prerequisite for economic growth. In Europe inflation is never higher than 2%, but for developing nations, where markets are unstable and sensitive to external and internal shocks, the admissible level is higher," Javadyan said.
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