ArmInfo.The Central Bank of Armenia, taking into account the expected macroeconomic development in the external sector and economy of Armenia, and the resulting inflationary impact, considers it expedient to continue raising the refinancing rate - now from 6.5% to 7%.
A more detailed rationale for this decision, adopted on August 3, was presented on the same day at a press conference by the Chairman of the Central Bank of the Republic of Armenia Martin Galstyan, noting that the annual real inflation continues to grow rapidly. Thus, the annual real inflation in June 2021 increased to 7.8% (from 0.8% per annum in June 2020), while the actual annual inflation in June increased to 6.5% (from 1.7% in June 2020). And in June of this year alone deflation was recorded at 0.8% (against deflationary 1.4% in June 2020).
At the same time, the Council of the Central Bank, being consistent in neutralizing the risks of accelerating inflationary expectations in parallel with the increase in domestic demand, considers the need for a possible tightening of monetary conditions. According to the Central Bank's forecast, 12-month inflation will remain at a high level until the end of 2021, then it will gradually decrease and in the forecast horizon will stabilize near the target level of 4%. Considering that the risks of inflation deviating from the medium-term rate, predicted in the conditions of the continuing uncertainty of economic prospects, are balanced, the Council of the Central Bank is ready, if they appear, to react appropriately to ensure price stability.
According to him, in line with the forecasts of the Central Bank, in the Q3 of 2021 the accelerated growth of economic activity and gross demand continues in the main partner countries of Armenia. In the context of large- scale vaccination in the world, in the international markets for raw materials and food products, a high inflationary environment remains due to positive expectations of a recovery in global demand. Against the background of this development and a number of temporary factors, the partner countries are experiencing a higher than expected inflation rate. In this situation, the Central Bank Council continues to expect inflationary influence on the Armenian economy from the external sector. Current developments indicate that the growth rate of the economic activity in Armenia to a certain extent exceeds expectations, and this is mainly due to positive development trends in agricultural and service sectors. Aggregate demand is also recovering at a fast pace, which continues to be fueled by continued high growth rates of private consumption, significant inflows of remittances from abroad, as well as rapid growth in external demand. The latter is reflected in the consistent improvement of Armenia's balance of payments. Changes in these demand factors generally indicate continued inflationary pressures.