ArmInfo. The Board of the Central Bank of Armenia, continuing to tighten monetary conditions, from November 1 raised the refinancing rate by 0.5 percentage points - from 10% to 10.5%. Head of the RA Central Bank, Martin Galstyan, presented the rationale for this decision at the press conference held on this issue.
He noted that there are tendencies of slowdown in economic activity in the global economy. The central banks of developed countries continue to significantly tighten monetary conditions. This is reflected in a slight decrease in prices in international commodity markets, but overall inflation in Armenia's main partner countries remains high. Although the proposal has restored value chains to some extent, risks in some markets related to disruption remain. As a result, a weak inflationary impact of the global economy on the Armenian economy is expected.
At the same time, he drew attention to the fact that the trends of high economic activity in Armenia persist. Speaking about the third quarter of 2022, he noted that economic growth is mainly influenced by the positive impact of external demand, expressed by a significant increase in the services sector. Demand expansion is supported by a steady increase in the influx of international visitors and remittances from Russia. This is simultaneously expressed by the improvement of the state of the foreign balance of RA and the revaluation of the dram. High demand contributes to the overheating of the labor market, the expansion of the general inflationary environment and the persistence of expectations of higher inflation. In such a situation, the implementation of a coordinated fiscal and monetary policy of a restraining nature becomes important. The Board of the Central Bank considers it expedient to raise the refinancing rate, since the relatively tightened monetary conditions and the revaluation of the Armenian dram will gradually help curb demand and reduce inflationary expectations.
The Board of the Central Bank will consistently take appropriate measures to stabilize inflation and neutralize any risk of anchoring inflation expectations. According to the planned monetary policy scenario, y-o-y inflation will gradually decrease and stabilize near the target threshold of 4% in the medium term. According to the latest data, in September 2022, y-o-y official inflation increased to 9.9%, and core y-o-y inflation reached 10.5%, while a year earlier in the same period (September 2021), despite the already emerging increase, comparable figures were lower - y-o-y official and core inflation were respectively 8.9% and 8% (against y-o-y 1.4% and 1.3% in September 2020). According to the assessment of the Council of the Central Bank of the Republic of Armenia, the risks of inflation deviating from an acceptable trajectory are basically balanced. In the event of risks in any direction, the Board of the Central Bank will react accordingly in order to ensure price stability.
