Friday, December 26 2014 10:24
Former head of Armenian Central Bank says loan and deposit interest rates will go up in 2015
ArmInfo. Bagrat Asatryan, former head of the Armenian Central Bank, predicts an upward trend in the interest rates on loans and deposits in 2015, following the recent hyper-devaluation of the national dram and increase in the refinancing rate.
Talking to ArmInfo, Bagratyan said the interests will go up after the New Year with economy awakening after relatively passive December and January. In addition, the Central Bank has made certain steps to stabilize the market quite recently. It is noteworthy that one of the local banks increased the deposits interest rate to 18% already in December. Other banks will follow it, indeed. It is a matter of time, he said.
To recall, the Board of Directors of the Bank of Russia increased the key interest from 10.5% to 17% on December 16 to restrict the revaluation and inflation risks. By Jan 1 2016, the Bank of Russia will bring the refinancing rate to the level of the key interest. Russian banks, in response, increased the annual deposit rates to 21%. The interests on retail loans went up too.
The CB announced on 8 December that it launches daily interventions to restore the balance in the exchange market and soften currency fluctuations. The interventions will last till the end of 2014. Dec 8-17 the CB sold $42mln: $6mln a day Dec 8-12 and $4mln a day Dec 15-17. The daily interventions were reduced to $2 million and will be gradually brought to naught by the end of the year. However, on 17 December, the Central Bank toughened the compulsory reservation standards for the raised funds in foreign exchange from 12% to 24%. Banks place their "reserve funds" with the CB in terms of the AMD only. Earlier on December 3, the CB increased the Lombard repo rate from 10.25% to 21%. Finally on 23 December, the CB increased the refinancing rate from 6.75% to 8.5%. To note, from Oct through Dec 17, AMD dropped against USD by almost 45%. Afterwards, the dram appreciated by 25% on December 18-20 and began to fall again starting December 22.
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