ArmInfo.The Central Bank of Armenia has kept the refinancing rate at the level of 5.75%. As was reported to ArmInfo in the press service of the Central Bank of Armenia, the decision was made on July 30 at a meeting of the Central Bank Council.
The regulator reports that deflation was recorded at 1.9% in June (against 1.6% in June last year), under conditions of which annual inflation fell to 2.5% due to a more significant seasonal decline in prices by a number of agricultural products.
"In the external sector, the tendencies of slowing global growth and weakening demand remain, which is why central banks of Armenia's main partners will pursue a policy of easing monetary conditions in the near future. In this situation, the inflationary environment in the international markets of basic food and commodities also continues to be weak, under the conditions of which, according to the CBA Council, in general, inflationary pressures from the external sector are not expected, "the Central Bank said. The CBA Council notes that in the second quarter, in line with expectations, high growth rates of economic activity remained, due to the growth of private consumption. In the second quarter of this year, the impact of fiscal policy on domestic demand is estimated as significantly constraining. It is expected that in the second half of the year it will be expanding, as a result of which for the year results the restraining influence of fiscal policy on gross demand will decrease significantly.
In the current situation, the Council of the Central Bank, giving preference to a gradual recovery of inflation, considers it appropriate to maintain the current monetary conditions, leaving the refinancing rate unchanged. At the same time, in the case of projected macroeconomic developments, it will be necessary to maintain the stimulating effect over a long period of time to achieve the target level of inflation in the medium term. As a result, it is expected that in the coming months inflation will remain at a level below the target threshold, stabilizing near the target bar in the medium term.
The CB also reports that the risks of inflation deviation from the predicted trajectory are mainly of a descending nature, which is due to the development of the external sector and the state budget "behavior", in which case the Central Bank will react accordingly to ensure price stability in the medium term. It should be noted that the Central Bank of Armenia lowered the refinancing rate from 6% to 5.75% at the end of January 2019, keeping it at this level to this day. On the same day, the rate on Lombard repos was reduced from 7.5% to 7.25%, and on deposits attracted from banks - from 4.5% to 4.25%.