Tuesday, June 24 2014 18:31
Central Bank of Armenia reduces refinancing rate from 7.25% to 7%
ArmInfo. The Central Bank of Armenia (CBA) has reduced the refinancing rate from 7.25% to 7%. The CBA press service has told ArmInfo that the decision was taken during the CBA Council's meeting on June 24.
At the same time, lombard repo rates and deposit rates were fixed at 8.5% and 5.5% respectively, having dropped from 8.75% and 5.75% respectively.
The CBA says that in May 2014 inflation made up 0.8% versus unchanged prices in May 2013. By late May 2014 the 12-month inflation reached 3.6%. The CBA Council believes that in the coming months the 12-month inflation will continue dropping to go lower than the threshold of the permissible range in Q3 2014 due to no more effects from last July's rise in energy tariffs.
The CBA says that amid the geopolitical situation the uncertainty in global economy and economic prospects of Armenia's partner countries still exists. Nevertheless, the CBA expects tangible inflation pressure from the external sector.
According to the CBA, the country's economic growth at the yearend 2014 meets the expected range. The relative passivity of the industrial sector and the slow recovery of construction have been compensated for by higher growth in agriculture and services than expected.
The CBA Council believes that the softening of monetary conditions and the expected expansion of the fiscal policy in the second half of 2014 will contribute to growth in aggregate demand and recovery of inflation rates within the mid-term outlook. As a result, in Q4 2014 the 12-month inflation will rise to the lower threshold of the target by late 2014. In case of that scenario, the CBA considers it expedient to keep softening the monetary conditions by reducing the refinancing rate. Nevertheless, the CBA does not rule out further adjustment of the monetary policy conditions given the development tendencies in global and national economies to ensure the target inflation within the mid- term outlook.
To note, the previous reduction of the refinancing rate took place on 13 May 2014 - from 7.5% to 7.25%. Lombard repo rates and deposit rates were fixed at 8.75% and 5.75%, respectively, having dropped from 9% and 6%, respectively.
Earlier, the Central Bank of Armenia reduced the refinancing rate from 7.75% to 7.5% on Feb 11, 2014, with the lombard repo rates and deposit rates reduced from 9.25% to 9% and from 6.25% to 6%, respectively. On 24 Dec 2013, the CBA reduced the refinancing rate from 8% to 7.75%. At the same time, the lombard repo rates were reduced from 9.5% to 9.25%, and deposit rates - from 6.5% to 6.25%. To note, 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.
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