Monday, September 27 2021 14:19
Naira Badalian

Central Bank of Armenia expects inflation to return to target  threshold

Central Bank of Armenia expects inflation to return to target  threshold

ArmInfo. Despite the fact that annual inflation in Armenia reached 8.8% in August 2021, and the growth continues, the Central Bank expects inflation to return to the  target value of 4%. This was stated by the Deputy Chairman of the  Central Bank of the Republic of Armenia Nerses Yeritsyan on September  27 at a meeting of the Standing Committee on Financial-Credit and  Budgetary Issues on the Execution of the State Budget for the first  half of 2021.

"After eliminating the base effect and taking into account the  monetary policy pursued since December 2020, inflation will return to  the target framework at 4%," the document reads.  According to him,  the work carried out in this direction by the Financial Regulator  over the past 7-8 months should already give the expected result.

Earlier, ArmInfo reported that on September 14, at a meeting of the  Council of the Central Bank of Armenia, the refinancing rate was once  again increased - from 7% to 7.25%. In this regard, rates on lombard  repo and on deposits attracted from banks were also increased by  0.25% percentage points - to 8.75% and 5.75%, respectively.  To note,  in 2021 this is the fifth increase in the refinancing rate. For the  first time, the Central Bank raised the refinancing rate on February  2 - from 5.25% up to 5.5%. Accordingly, by 0.25 percentage points  were raised rates on lombard repo - from 6.75% to 7%, and on  attracted deposits from banks to deposits - from 3.75% to 4%. The  second increase in the refinancing rate followed on May 4 - by 0.5  percentage points to 6%, in accordance with which the rates on  lombard repo were also increased - to 7.5%, and on deposits attracted  from banks - to 4.5%. The third increase in the refinancing rate  followed on June 15 - up to 6.5%, in accordance with which the rates  on lombard repo were also increased - up to 8%, and on deposits  attracted from banks - up to 5%. And the fourth increase in the  refinancing rate took place on August 3 - by 0.5 percentage points to  7%, in accordance with which the rates on lombard repo were also  increased - to 8.5%, and on deposits attracted from banks - to 5.5% .   Prior to that, in 2020, the Central Bank revised the refinancing rate  four times downward and once upward. In particular, after the  reduction of the refinancing rate from 5.5% to 4.25% (March, April,  June, September), an increase to 5.25% took place in December. And  the corresponding change was undergone by the rates on lombard repo  and on deposits attracted from banks - up to December 6.75% and  3.75%.

Meanwhile, according to statistics, in August of this year official  annual inflation in the consumer market of Armenia reached 8.8% (data  of the RA Statistical Committee), while real inflation increased to  8% (data of the Central Bank of Armenia), against 1.8% and 1.1% per  annum, respectively, in the same month of 2020. So, in August 2021 to  August 2020, consumer prices increased by 8.8% (against an increase  of 1.8% a year earlier) due to an increase in the price of food  products by 14.5% and non-food products by 9.4%, with an increase in  tariffs for services by 1.8%. In August 2020 alone, inflation was  recorded at 0.4% (against 0.1% deflation in August 2020) due to the  rise in prices for food products by 0.5% and non-food products by  0.4%, while tariffs for services increased by 0.1%. In Yerevan,  consumer prices increased by 0.4% in August 2021, against a decline  of 0.1% a year earlier.

The increase in consumer prices by 0.4% was accompanied by a 0.2%  devaluation of the dram against the dollar, and in January-August  against the background of inflation of 3.7%, there was a revaluation  of the dram against the dollar by 5.2% (against deflation of 1.2% and  devaluation of the dram by 1.5% a year earlier). The estimated  exchange rate of the dram to the dollar in August 2021 averaged 491.7  AMD / USD 1, exceeding the level of a year ago by 1.3% (485.5 AMD /  USD 1).  Economic growth in the state budget for 2021 is foreseen at  3.2%, while inflation is set at 4% (+/- 1.5%). 

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