Central Bank of Armenia kept refinancing rate at 6%

ArmInfo. The Central Bank of  Armenia kept the refinancing rate at 6%. As the press service of the  Central Bank of Armenia told ArmInfo, this decision was made on March  28 at a meeting of the Board of the Central Bank. In accordance with  this, the rates for pawnshops and deposits attracted from banks  "froze" at 7.5% and 4.5% respectively.

It is noteworthy that the head of the Central Bank of Armenia Artur  Javadyan expressed his opinion on the matter the day before: "The  high level of dollarization and the slow decline in deposit rates  limit the maneuver of the Armenian CB in monetary policy, but the  main task of the regulator is to ensure price stability. Does not  intend to continue easing monetary conditions, aimed at gradual  acceleration of inflation, because it believed that too low rates can  create risks. An undesirable effect on the dynamics of the real and  financial sectors of the economy. This is why the Central Bank will  be more cautious when considering the possibility of their further  reduction. We estimate the easing of monetary conditions as  sufficient."

The CB Board states that the economic activity recorded in  January-February 2017 significantly exceeded expectations, which was  mainly due to higher, than expected, growth rates in the industrial  sector, services and trade sector. At the same time, domestic demand  continues to recover gradually, mainly due to the stimulation of  monetary and fiscal policies in 2015-2016. Under these circumstances,  the Central Bank, considering that the fact that the refinancing rate  has decreased by 4.5 percentage points over the past 2 years (12  revisions) will continue to affect the economy of the country and in  2017, considers it advisable to leave monetary conditions unchanged,  as it expects Accelerate the recovery of economic activity and  inflation. In February 2017, deflation was 0.9%, against a higher  deflation of 1.4% in February 2016. At the same time, annual  deflation (February 2017 to February 2016) was 0.2%, against  deflation of 1.7% a year earlier. According to the Central Bank,  annual inflation, as predicted, will continue to recover with the  approach to the range of the target corridor.

To note, the previous revision of the refinancing rate took place on  February 14, 2017 - a decrease from 6.25% to 6%, with the concomitant  decrease in the rates of lombard repo from 7.75% to 7.5% and deposits  attracted from banks from 4.75% % To 4.5%. At the beginning of the  monetary easing cycle, the refinancing rate was 10.5%, after which,  from August 2015, the Central Bank began to gradually reduce the key  interest rate in order to spur inflation and consumer demand, as the  demand in Armenia declined due to the economic crisis in Russia,  Consumer demand due to the reduction in remittances of Armenian  citizens working in the Russian Federation. At the end of 2015,  namely on December 22, the refinancing rate was reduced from 9.75% to  8.75%, at the same time, the rates on pawn-shop repo decreased from  11.75% to 11.25%, and on attracted deposits from 8, 75% to 8.25%. At  the end of 2016, namely on December 27, the refinancing rate was  already reduced from 6.5% to 6.25%, along with the rates for  pawn-shop repo from 8% to 7.75% and deposits from banks from 5% to  4.75%.