ArmInfo. Our calculations show that we are approaching the neutral interest rate level. This opinion was expressed by head of the Central Bank of Armenia Martin Galstyan at a press conference on the decision of the Central Bank Board to reduce the refinancing rate by 0.25p.p. to 8.5%.
He recalled that since June 2023 to this day the Central Bank Board has reduced it by 2.25 percentage points. "And we must understand that we are entering a zone where every next step must be more balanced, because we are operating in an environment where we are part of the global world," he noted.
At the same time, Galstyan noted that if the US Federal Reserve raised the key rate from 5.25% to 5.50%, the Central Bank of Armenia, when making a decision, takes into account the indicator of the country risk premium, which should be between in the range of the exchange rate of the Armenian and American currencies.
"In other words, the factors are numerous, so, as a rule, we work with such unobservable variables as potential GDP, a neutral interest rate. And if we are at this level, then, in fact, we do not stimulate or restrain the economy. Therefore, the goal is the following - carefully, step by step, comparing the two scenarios of the Central Bank, to approach at a reasonable level that will allow, on the one hand, to contain inflation, bringing it closer to the target level, and on the other, to monitor what is happening with the economy," he concluded.
According to the RA Statistical Committee, in February 2024, a 1.7% deflation was recorded in Armenia. which was provoked by: a 5.9% reduction in the price of food products (with an increase in the price of alcohol by 7.1% and cigarettes by 8.3%), price increase of non-food products by 0.7% and service tariffs by 3%.
As Galstyan noted, based on the results of Q1, Armenia will not reach the target inflation rate of 4 percent. "Calculations show that we will be very far from this level," he said.
