ArmInfo.The central bank kept the refinancing rate at 5.5%. As the Central Bank of Armenia press service told ArmInfo, this decision was made on December 10 at a meeting of the Central Bank Council.
The Central Bank said that the uncertainty of the development of the world economy has slightly decreased, but nonetheless, its low growth rates remain. This is reflected in the persistence of weak global demand and a low inflation environment in international commodity markets. The Central Bank Council believes that a significant impact from the external sector on the inflationary environment is not expected. The CB Board notes that in the III quarter economic activity in Armenia exceeded the forecasted level, and this trend will continue in the IV quarter, and the service sector will act as the main driver. Domestic demand also remains high due to growth in private consumption, which continues to be promoted by the stimulating effect of monetary conditions. At the same time, despite the fact that since the beginning of the year the influence of fiscal policy on gross demand is estimated to be restraining, nevertheless, in the fourth quarter and next year it is expected to be stimulating.
The Central Bank Board, based on the foregoing and giving preference to a gradual recovery in inflation, considered it appropriate to maintain the refinancing rate at the same level. The Council of the Central Bank believes that in the context of projected macroeconomic development, it will be necessary to maintain the stimulating effect of monetary conditions in the medium term in order to bring inflation to the target threshold. As a result, inflation is expected to remain low in the coming months, with a gradual return to the target threshold in the medium term.
The Central Bank Council emphasizes that the risks of deviation of inflation from the forecast threshold are generally balanced, but the Central Bank is ready to react accordingly to ensure price stability in the medium term.
It should be noted that the Central Bank of the Republic of Armenia reduced the refinancing rate from 5.75% to 5.5% on September 10, 2019, in accordance with which the rates on Lombard repo were reduced by 0.25 percentage points - from 7.25% to 7%, and deposits from banks - from 4.25% to 4%. Prior to this, a decrease in the refinancing rate took place at the end of January 2019 - from 6% to 5.75%, in connection with which the rates on pawnshop repo decreased the same way - from 7.5% to 7.25%, and on deposits attracted from banks - from 4.5% to 4.25%.