ArmInfo. The Council of the Central Bank of Armenia once again this year increased the refinancing rate - from 9.5% to 10%, gave a brief justification for its decision, which was presented at a press conference on September 13 by the Chairman of the Central Bank of the Republic of Armenia Martin Galstyan.
The rationale notes that in the Q3 of 2022, trends of low economic growth and high inflation continue in the main partner countries of Armenia. The central banks of developed countries will continue to pursue a restrained monetary policy, which will result in tightening global financial conditions and lead to a slowdown in economic activity in partner countries. As a result, the international commodities market will experience some reduction in prices, which will contribute to the gradual mitigation of the global inflationary environment. Thus, the inflationary impact from the external sector on the Armenian economy is expected to weaken.
The Chairman of the Central Bank noted that in the Q3 of 2022, the Armenian economy continues to experience high activity, which is more observed in the service sector and the construction sector. "Positive trends continue in exports. The influence of demand factors is the main trigger of high economic growth rates. The latter is still due to a significant influx of international visitors and a surge in incoming remittances. High demand contributes to the expansion of the inflationary environment and the maintenance of high inflation expectations," he noted, stating that the official annual inflation in Armenia in August reached 9.1%, and the core annual inflation reached 10.2% (from annual inflation 8.8% and 8% respectively in August 2021 - Ed. note)
In this situation, the Central Bank Council considered it appropriate to raise the key rate (by 0.5 percentage points to 10%). Galstyan said that a relatively tightening monetary policy and the strengthening of dram will gradually help curb demand and reduce inflationary expectations. "The Central Bank Council will be consistent in its actions aimed at stabilizing inflation and neutralizing any risk of "anchoring" inflation expectations. Under the planned monetary policy scenario, annual inflation will decrease and stabilize near the target 4% threshold at the end of 2023," added the Chairman of the Central Bank. The Council of the Central Bank assesses the risks of inflation deviating from the envisaged trajectory, mainly as balanced (the target threshold is set at 4%, +/- 1.5 - Ed. note). If they move in any direction, the Central Bank Council will react accordingly in order to ensure price stability. The Central Bank of Armenia announces that it will present a more detailed justification for the current increase in the refinancing rate in the Central Bank's Monetary Policy Program (MPP) for the third quarter of 2022, which is being prepared for publication at the end of September.
It should be noted 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 - up to 9.25% and in August - up 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%. Recall that in previous years, similar to the current level of the refinancing rate was fixed in 2015 - in the range of 10.25- 10.5%, in particular in January of that year, being increased by 1.75 percentage points. - up to 8.5%, in February - by 1 p.p. - up to 9.5%, in March - by another 1 p.p. - up to 10.5%, remaining at this level after 6 months and then reduced by 0.25 percentage points in November - down to 10.25%.