ArmInfo. At September 13, 2022 meeting, the CBA Board decided to raise the policy rate by 0.5 percentage points setting it at 10%, the press service of the Central Bank of Armenia told ArmInfo. According to the source, "In August 2022, 12-month inflation decreased to 9.1% at the end of the month. 12-month core inflation continued to grow reaching 10.2%.
In the third quarter of 2022, low economic growth and high inflation continued to sustain in the main partner countries of Armenia. The central banks of advanced countries will continue to conduct contractionary monetary policy. This will be reflected in the tightening of global financial conditions and in slowing of economic activity. Subsequently, a certain drop of prices will be observed in the international commodity markets, contributing to the gradual easing of the global inflationary environment. Hence, it is expected that inflationary effects from the external sector will subdue. During the third quarter of 2022, high economic activity continued to be observed in Armenia. It mostly is witnessed in services and construction sectors. Positive developments continue in the export sector as well. High economic growth is predominantly driven by the demand factors. Again, its main contributors are the significant influx of international visitors and remittances. High demand contributes to the expansion of the inflationary environment and persisting high inflationary expectations.
In the current situation, the Board finds it appropriate to raise the policy rate. Relatively contractionary monetary policy and dram appreciation will gradually contribute to curbing demand and reducing inflationary expectations. The CBA Board is consistent in taking adequate actions to stabilize inflation and to offset any risk of deanchoring of inflation expectations and. In line with the outlined monetary policy scenario, the 12-month inflation will gradually decline and from the end of 2023, will stabilize around the 4% target. The CBA Board considers that the risks of inflation deviation from the projected trajectory are mainly balanced. Should the risks materialize in any direction, the Board stands ready to respond accordingly in fulfilment of the price stability objective."
It is worth noting that this is the fourth increase in the refinancing rate in 2022, the previous three took place in February - from 7.75% to 8%, in March - to 9.25% and in August - to 9.5%. And from 2021 to this day, there have been ten increases in the refinancing rate - in total from 5.25% to 10%.
According to statistics, in July 2022, official y-o-y inflation in the consumer market of Armenia reached 9.3%, against respectively 8.2% in July 2021. And the core y-o-y inflation calculated by the Central Bank in July 2022 amounted to 10.1%, against respectively 8.1% in July 2021. According to the data of the RA Statistical Committee, y-o-y inflation in the consumer market in August 2022 reached 9.1% (versus annual inflation 8.8% in August 2021), in January-August this year it amounted to 5% (with y-o-y inflation rate of 8.4%).
It would be appropriate to recall that the forecast of the Central Bank, updated at the end of June, foreshadowed inflation at the level of 8.5% for 2022 (against the actual 7.7% in 2021), with the target of 4% approaching in 2024. Moreover, the forecasts of the Central Bank in comparison with the March version of the report has changed, in particular, in terms of inflation, instead of the previously expected 6.6% in 2022, the updated June version has a higher level of 8.5%, and the predicted GDP growth, on the contrary , improved from the previous 1.6% to the updated 4.9%. It is appropriate to note that the June 2022 forecast reflects new challenges against the background of the Russian-Ukrainian military-political conflict and comprehensive, unprecedented, large-scale US and European sanctions against Russia, the share of which dominates in the main macroeconomic indicators of Armenia. In September, the Central Bank plans to update its forecasts.
