Monday, June 12 2023 14:08

ArmInfo. The monetary policy of Armenia's Central Bank (CBA) has reached "a important critical point," CBA Chairman Martyn Galstyan stated at a meeting of the Standing Committee on  Financial-Credit and Budgetary Affairs, Parliament of Armenia, as he  spoke of the inflationary trends in Armenia. 

The CBA Board plans to make a decision on the key rate. 

"After two years of high inflation, it is now much lower, even lower  than the 4% target. This may it was 1.3%," Mr Galstyan said. 

Inflation was reduced due to such factors as lower prices for  imported goods, including food, as well as for fuel. On the other  hand, the prices for some services (hairdressing, repair, etc) remain  high after remaining stable for decades.  One of the causes of price  reduction is supply, particularly, the resumed supplies after the  COVID period. On the other hand, high prices for services are due to  higher demand. 

"As you know, in its inflation targeting the CBA is focusing on  demand-pull inflation management. Yes, our policy of raising the  refinancing rate is aimed at curbing demand. On the other hand,  economy has excessive demand. That is, our economic growth and demand  will remain much higher than our potential," Mr Galstyan said. 

Last December, 8.3% inflation was recorded in Armenia, the annual  core inflation being 9.5%, as against 7.7% and 7.3% respectively in  December 21. According to the statistical data, the 8.3% inflation  was due to a 9.9% rise in food prices and a 7.1% rise in nonfood  prices, with a 7.2% rise in services prices. In 2021, the 12.5% rise  in food prices and an 8% rise in nonfood prices was accompanied by a  1.9% rise in service prices. 

The CBA raised the refinancing rate to 10.75% on December 13, 2022,  which proved a record after the 10.5% of 2015. The CBA raised the  refinancing rate last year: in February, from 7.75% to 8%, in March,  up to 9.25%, in August, up to 9.5%, in September, up 10.5%, in  November, from 10% to 10.5%. From 2021 to December 13, 2022, the CBA  raised the refinancing rate 12 times - from 5.25% up to 10.75%. in  previous years, the historical maximum of the refinancing rate was  recorded on February 10, 2015 - from 9.5% up to 10.5%. 

This May, the CBA pointed out a slight upward trend in the average  market interest rates.  After sideways throughout 2022, this May the  rates slowly went up - 10.19% to 10.39%. ArmInfo financial experts  believe that, if the CBA pays attention to this insignificant trend,  the key rate could reduce by 0.25-05 percent to signal the  undesirability of raising the cost of money to the market.