Tuesday, March 17 2020 16:07

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%.