ArmInfo. The weak deflationary impact from the external sector on the Armenian economy will continue. During the press conference held on October 31, Governor of the RA Central Bank, Martin Galstyan, presented such a forecast regarding the reduction of the refinancing rate from 9.75% to 9.5%.
"In recent months, a slight acceleration in domestic demand has been observed in Armenia's main partner countries. At the same time, due to geopolitical developments, the uncertainty of global economic growth has increased and volatility in international commodity markets has increased. YOY inflation in partner countries continues to exceed the target level. Under these conditions, the central banks of these countries will continue to pursue contractionary monetary policy in the near future," the head of the Central Bank explained.
At the same time, he noted that in September of this year, official y-o-y inflation in Armenia decreased to 0.1% (from 9.9% a year earlier), and the basic indicator was at a deflationary the level of 0.1% (versus inflation of 10.5% a year earlier).
There were stronger-than-expected economic activity in Armenia in recent months , which continues to be supported by strong growth in the construction and services sectors. At the same time, domestic demand continues to expand in the economy. In the context of weak deflationary influence from the external sector and the ongoing contractionary monetary policy, a low inflationary environment remains, which is reflected by a slowdown in wage growth in the labor market.
In the current situation, the Central Bank Board considered it appropriate to once again reduce the refinancing rate - this time by 0.25 percentage points. The Central Bank Board will continue to consistently take the necessary steps to ensure demand adjustment and stabilization of inflation expectations. YOY inflation will remain below the target threshold in the near future under the scenario outlined by the Monetary Policy, but in the medium term it will gradually increase and stabilize around the target of 4%.
According to the Central Bank Board, the risks of inflation deviating from the planned trajectory are largely balanced, but if risks of any direction arise, the Central Bank will react appropriately in order to ensure price stability.
In 2023, the refinancing rate remained at a record level of 10.75% until almost mid-June, after which reductions followed one after another - three times by 0.25 percentage points and once by 0.5 percentage points: June 13 - up to 10.5%, August 1 - up to 10.25%, September 12 - up to 9.75% and October 31 - up to 9.5%. Before this, the Central Bank regularly raised the key rate for two years - in 2021-2022 (twelve times), first to a historical maximum of 10.5%, and then to a new record level of 10.75%. And even earlier in 2020, the Central Bank, after reducing the refinancing rate four times (March, April, June, September 2020) from 5.5% to 4.25%, in December of the same year raised it to 5.25% and then continued to increase over the next two years. Let us recall that in previous years, the historical maximum refinancing rate was recorded in 2015 - up to 10.5%, in particular on February 10, by 1 percentage point, from 9.5% to 10.5%.
