ArmInfo. The Central Bank of Armenia reduced the refinancing rate from 5.5% to 5.25%. As the press service of Central Bank of Armenia told ArmInfo, this decision was made on March 17 at a meeting of the Central Bank Board.
In accordance with this, rates on lombard repo were reduced by 0.25 percentage points - from 7% to 6.75%, and on deposits attracted from banks - from 4% to 3.75%.
The CB Board notes that the continued spread of coronavirus has a very negative effect on the growth of the global economy in general and Armenia's trading partner countries in particular. Uncertainty sharply worsened in the global financial markets, which was reflected in the continued decrease of stock indices of developed countries, lower commodity prices, devaluation of currencies of developing countries, whose impact on the Armenian economy is assessed as deflationary. According to the Central Bank, in the Armenian economy these effects are manifested by a simultaneous reduction in gross supply and gross demand. The service sector suffered most, especially segments related to tourism and leisure activities.
According to the base scenario of the Central Bank, in the short term, a significant slowdown in economic growth is expected, but in the long term this will not affect the economic potential of the country.
The Central Bank Council, discussing economic development trends, estimated that in this situation the role of monetary policy is limited, since monetary instruments cannot influence the growth of real economic uncertainty caused by health problems and the development of individual sectors of the economy. In this situation, it is important to maintain macroeconomic stability of the country, which will ensure the effectiveness of targeted measures developed by the government on economic policy.
The Central Bank Council believes that due to the low inflation policy pursued in recent years, inflation expectations are currently quite substantial. Consequently, based on the goal of ensuring price stability, and assessing the current development of an inflationary, the future consequences of the global economy and the resulting uncertainty, the Central Bank Council found it expedient to reduce the refinancing rate by 0.25 percentage points. As a result, according to the base scenario of the Central Bank, inflation in the coming months will remain at a relatively low level, gradually approaching the target threshold. According to February 2020, the consumer market of Armenia recorded a deflation of 0.2% (against 0.6% inflation in February last year), with a y-o-y deflation of 0.5%.
At the same time, the Central Bank monitors the economy and financial markets on a daily basis, discusses various alternative scenarios and is ready to respond to any development of the situation in the interest of ensuring price stability in Armenia.
It should be noted that the previous decrease in the refinancing rate by the Central Bank of the Republic of Armenia dated September 10, 2019 - from 5.75% to 5.5%, and then the rates on lombard repo were reduced by 0.25 percentage points - from 7.25% to 7%, and on deposits attracted from banks - from 4.25% to 4%. And until today, the refinancing rate has remained at 5.5%.
