Tuesday, March 25 2014 19:00

Central Bank of Armenia retains refinancing rate at 7.5%


ArmInfo. The Central Bank of Armenia has retained the refinancing rate at 7.5%. The CBA press service has told ArmInfo that the relevant decision was taken at the CBA Council's meeting on March 25.

The CBA says that in February 2014 deflation made up 1.2% versus 0.4% deflation in February 2013. By late Feb 2014 the 12-month inflation reached 4.6%. The CBA believes that in the coming months 12-month inflation will continue dropping and in Q3 2014 it will reach the lower threshold of the permissible range due to no more effects from last July's rise in energy tariffs.

The CBA says that in early 2014 the country retained the slow rates of economic growth due to the slow recovery of the construction sector.

The CBA Council thinks that the easing of the monetary policy conditions amid the expansion of the fiscal policy expected for the second half of 2014 will expand the aggregate demand and restore the inflation rates. As a result, by late 2014 the 12-month inflation will reach the target. In the meantime, the AMD devaluation fixed in early 2014 and the reduction of the AMD obligatory reserve rate will also contribute to the growth of aggregate demand.

The CBA Council will further adjust the monetary policy conditions with due regard for the trends of global economy development and Armenia's economic development in order to ensure the target inflation within the mid-term outlook.

To recall, earlier the refinancing rate was reduced on 11 Feb 2014 from 7.75% to 7.5%. On 24 Dec 2013, the CBA reduced the refinancing rate from 8% to 7.75%. At the same time, lombard repo rates were reduced from 9.5% to 9.25%, and deposit rates - from 6.5% to 6.25%. On November 12, 2013, the refinancing rate dropped from 8.5% to 8%. On the same day the deposit rates dropped from 7% to 6.5%, and the lombard repo rates - from 10% to 9.5%. On 12 April 2011 the CBA reduced the refinancing rate from 8.5% to 8% and retained it till 13 Aug 2013, when the refinancing rate was raised to 8.5% again. The CBA's August decision aimed to curb the inflation expectations and dampen the secondary impact of the growth in energy prices. On 13 Aug 2013 the deposit rates were raised from 6.5% to 7%, and the lombard repo rates were retained at 10% till 12 Nov 2013.