ArmInfo.Armenian Minister of Economic Development and Investments Tigran Khachatryan believes that lowering the refinancing rate to 5.75% will not lead to inflationary pressure. He expressed this opinion on January 31 in an interview with journalists. On January 29, the Central Bank of Armenia lowered the refinancing rate by 0.25 percentage points from 6% to 5.75%. The key rate has remained at 6% since February 2017.
According to the Minister, the authorized body represented by the Central Bank of Armenia is very competent and one should not expect possible negative consequences. Evidence of that, as the head of the department pointed out, macroeconomic stability that has been preserved over the past years. "Inflation is at a controlled level and even if it rises a little, it is only welcome, because moderate inflation stimulates economic growth," Tigran Khachatryan said.
According to statistical data, in 2018, inflation in Armenia's consumer market was lower - 1.8%, compared to 2017 - 2.6%. This was largely triggered by a 3.2% increase in prices for non-food items (including alcohol and cigarettes). Food increased by 1.8%, tariffs for services - by 0.8%.
To note, on January 29, the Council of the Central Bank stated that at the end of 2018 economic activity continued to weaken, in connection with which economic growth is expected to be around 5%. The main factors behind the decline in gross demand were the restraining process of fiscal policy and the slowdown in the growth of private spending.
The Central Bank Board believes that low inflation is partly structural in nature, due to the long-term changes in economic and public policy, which also contributes to maintaining the purchasing power of income and securing inflationary expectations. Based on this, the CB Board found it expedient to revise the refinancing rate downwards, thereby giving a more stimulating effect to the monetary conditions.