ArmInfo.The Board of the Central Bank of Armenia estimates that the consistent tightening of monetary conditions in recent years has a sufficient impact on the regulation of progressive consumer demand, curbing of inflation and on ensuring its target threshold in the medium term.
This is stated in the message of the Central Bank of the Republic of Armenia, which substantiates in detail the decision taken on September 14 to raise the refinancing rate by 0.25% to 7.25%. And the feasibility of raising the key rate is due to the continuing, mainly inflationary impact from both the external sector and the domestic economy.
In these conditions, the Central Bank predicts that 12-month inflation will remain at a high level until the end of 2021, then in 2022 it will approach the target threshold of 4%, and stabilize at this level in the medium term. According to the latest data, in August 2021. 0.4% inflation was recorded (against 0.1% deflation in August 2020), and the y-o-y official inflation continued to increase and at the end of the reporting month, according to statistics, reached 8.8%. According to the Central Bank of Armenia, the y-o- y real inflation in August was 8%. In recent months, the short-term acceleration of inflation is mainly due to the rise in prices for seasonal food products, while real inflation has formed at a lower-than-expected level.
The Board of the Central Bank believes that the progressive growth of private consumption, with a modest increase in production capacity, is currently contributing to the expansion of the domestic inflationary environment.
The Central Bank draws attention to the fact that in Q3 2021, despite a slight slowdown in the process of vaccination against coronavirus in the world and new outbreaks of the pandemic in many countries, economic activity and gross demand in Armenia's main partner countries continue to grow at a faster than expected rate.
In the current situation, under the influence of a number of supply and demand factors, the inflationary environment remains on the international markets for raw materials and food products, and in the partner countries the inflation trajectory turned out to be higher than the previously cited forecasts. In these conditions, from the external sector on the Armenian economy, mainly inflationary impact is expected.
The current development of economic growth in Armenia in 2021 is assessed more positively than expected due to higher growth in agriculture and the service sector.
Gross demand is also growing at a slightly faster than expected rate, supported by strong growth in private consumption, higher than expected volumes of remittances from abroad, and a positive external demand environment, while growth in private investment remains relatively subdued.
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 Board of the Central Bank is ready, if they arise, to react appropriately to ensure price stability.
