Friday, October 26 2012 19:35
Head of VTB Bank (Armenia): Armenia lacks macroeconomic prerequisites to reduce refinancing rates
ArmInfo. Armenia lacks macroeconomic prerequisites to reduce the refinancing rates, Yuri Gusev, Director General, Chairman of Directorate of the VTB Bank (Armenia), said at today's press conference in Yerevan. He said that the banking sector now depends on other macroeconomic indices more than on the refinancing rate.
To recall, at the Oct 9 session, the Board of the Central Bank of Armenia decided to retain the refinancing rate at 8%. In the short-term outlook, the inflationary pressure in the domestic market will remain due to the high private consumption and higher economic growth than expected. For this reason, the CBA considered it reasonable to retain the refinancing rate at 8%. To recall, the CBA Board reduced the refinancing rate from 8.5% to 8% on 12 April 2011.
The AmRating analysts think that the reduction of the interest rates in the market would allow the banks to overcome the excessive liquidity and restore the balance between the demand and supply in the banking system. The balance is possible only in case of activation of the business environment, which leads to growth in the demand for credit resources. It is not ruled out that a bigger balance might be gained by means of dampening the conditions of the monetary policy, however, the achievement of target inflation by the CBA and the consideration of external inflation risks amid low diversification and other shortcomings of economy restrains the market activation process, retaining it at the so-called aurea mediocritas. Analysts think that this status quo in the market is likely to last till the presidential elections in Feb 2013.
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