ArmInfo. The scenario of the planned monetary policy (MP) of the Central Bank of RA envisages a rapid decline in y-o-y inflation, which will be below the target level in the near future, and will stabilize at the target level of 4% in the medium term. Head of the Central Bank of the Republic of Armenia Martin Galstyan stated on May 2 during a press conference, presenting the rationale for the regulatory decision to keep the refinancing rate at the level of 10.75%.
In March 2023, the official y-o-y inflation in the consumer market of Armenia decreased to 5.4% from the y-o-y inflation rate of 7.4% in March 2022. The y-o-y core inflation calculated by the Central Bank also decreased - to 6.4% in March 2023 from they-o-y inflation rate of 7% in March 2022.
At the same time, he noted that in Q1 2023, the slow growth rates of the global economy and the GDP of the main partner countries of Armenia were maintained. It is assumed that the problems that have arisen in the U.S. banking system are generally not of a systemic nature and will not have a significant macroeconomic impact. YOY inflation continues to decline in Armenia's partner countries, but the overall inflationary environment remains high due to continued strong demand and labor market pressures. In this regard, in the near future, the central banks of the partner countries will continue to tighten monetary conditions. Tight international financial conditions are driving down commodity prices. As a result, external inflationary pressure on the Armenian economy continues to weaken.
The Armenian economy remained strong in early 2023, supported by strong growth in the services and construction sectors. Aggregate demand remains strong amid continued large inflows of capital and labor immigrants, a significant increase in tourism and income growth in the country's economy. As a result of the ongoing contractionary monetary policy, the dram will revalue and the inflationary impact coming from the external sector will weaken, the y-o-y inflation in Armenia will decrease.
Nevertheless, high demand and inflationary expectations still continue to influence wages and maintain high inflation for certain groups of goods and services.
In this regard, the Board of the Central Bank considered it expedient to leave the refinancing rate unchanged for the time being - at the level of 10.75% (according to the decision of May 2, 2023). The Board of the Central Bank will continue to consistently take appropriate steps to regulate demand and stabilize inflation expectations. According to the Central Bank Board, the risks of inflation deviating from the planned trajectory are basically balanced. If they move in any direction, the Central Bank Board will react accordingly in order to ensure price stability.
It should be noted that in December 2022, the official y-o-y inflation was 8.3% in Armenia (according to statistical data), and the core y-o-y inflation was 9.5% (according to the Central Bank of the Republic of Armenia), against the y-o-y inflation of 7.7% and 7.3%, respectively ( official and basic) in December 2021.
It would be appropriate to recall that the refinancing rate was raised to the level of 10.75% by the Central Bank on December 13, 2022, and this turned out to be a new historical maximum after 10.5% in 2015. The previous five increases in the refinancing rate - took place in 2022 in February from 7.75% to 8%, to 9.25% in March, to 9.5% in August, to 10% in September and to 10.5% in November. And from 2021 to December 13, 2022 inclusive, there were twelve increases in the refinancing rate - in total from 5.25% to 10.75%. In previous years, the historical maximum of the refinancing rate was fixed in 2015 - 10.5% (according to the February decision of the Central Bank), with a repetition of this level in 2022 (according to the November decision of the Central Bank).
