ArmInfo. At the November 1, 2022 meeting, the Board of the Central Bank of Armenia (CBA) decided to raise the refinancing rate by 0.5 percentage points, setting it to 10.5% , the press service of the Central Bank of Armenia told ArmInfo,
According to the source, "in September, 2022, the 12-month inflation rose amounting to 9.9%. The 12-month core inflation also increased, reaching 10.5%.
Slowing trends of economic activity are observed in the global economy. The central banks of advanced countries continue to significantly tighten monetary conditions. This is expressed by a certain drop in prices in international commodity markets, however, headline inflation in the main partner countries of Armenia is still high. Notwithstanding certain recovery in supply chains, risks related to their disruptions in individual markets remain. As a result, weak inflationary effects on the Armenian economy from the global economy are expected.
In the third quarter of 2022, the trends of high activity in the Armenian economy are persisting. The economic growth primarily bears the positive effects of external demand, reflected as a significant increase in the services sector. Continued increase in the inflow of international visitors and money transfers from the Russian Federation contributes to the expanding of demand. This is also expressed in the improvement in Armenia's external balance position and dram exchange rate appreciation. High demand also contributes to the heating of labor market, the expanse of overall inflationary environment and persistence of high inflation expectations. In current circumstances, the conduct of contractionary and coordinated fiscal and monetary policy is important.
In the current situation, the Board of the CBA finds it appropriate to raise the policy rate. A relatively tightening monetary policy and the dram appreciation will gradually contribute to containing demand and reducing inflationary expectations. The Board of the CBA will be consistent in taking adequate actions to stabilize inflation and absorb any risk of de-anchoring inflation expectations. In accordance with the monetary policy scenario, the 12-month inflation will gradually decrease and stabilize around the 4% target in the medium run.
The Board of the CBA estimates that the risks of inflation deviating from the projected path are mainly balanced; should such risks materialize in either direction, the CBA will respond accordingly to fulfill of the price stability objective."
It should be noted that this is the fifth increase in the refinancing rate in 2022, the previous four increases took place in February - from 7.75% to 8%, in March - to 9.25%, in August - to 9.5% and in September - up to 10.5%. And from 2021 to this day, there have been eleven increases in the refinancing rate - in total from 5.25% to 10.5%.
According to statistics, in June 2022m the official y-o-y inflation in the consumer market of Armenia reached 10.3%, against respectively y-o-y inflation 6.5% in June 2021. And the core y-o-y inflation calculated by the Central Bank in June 2022 amounted to 9.4%, against respectively y-o-y inflation 7.8% in June 2021. t 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. Furthermore, the CBA's forecasts have changed compared to the March version of the report, 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 projected GDP growth, on the contrary, has 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 backdrop of the Russian-Ukrainian military-political conflict and comprehensive, unprecedented, large-scale US and European sanctions against Russia, the share of which in the main macroeconomic indicators of Armenia dominates. It should be noted that the refinancing rate was raised by 1.25% up to 9.25% on March 15, 2022, with the lombard repo facility rate raised from 9.5% up to 10.75% and deposit facility rate raised from 6.5% up to 7.75%. Earlier, on February 1, the refinancing rate was raised by 0.25% up to 8%, with the with the lombard repo facility rate raised from 9.25% up to 9.5% and deposit facility rate raised from 6.25% up to 6.5%. Last year, the refinancing rate was last raised on December 14, 2021, - from 7.25% up to 7.75%. Last year, the CBA raised the refinancing rate six times: in February (by 0.25% up to 5.5%), in May (by 0.5% up to 6%), in June (by 0.5% up to 6.5%), in August (by 0.5% up to 7%), in September (by 0.25% up to 7.25%) and in December (by 0.5% up to 7.75%), with the lombard repo facility rate raised from the initial 6.75% up to 9.25% last December, and deposit facility rate raised from the initial 3.75% up to 6.25%. In 2020, the CBA revised the refinancing rate down four times and up one time. Specifically, after revising the refinancing rate from 5.5% down to 4.25% (March, April, June, September), the CBA revised it up to 5.25%, with the lombard repo facility rate and deposit facility rate at 6.75% and 3.75% respectively in December.
