Central Bank Governor: Inflation in Armenia to approach 2.2%-2.5% by  end of year

ArmInfo.Inflation in Armenia will approach 2.2%-2.5% by the end of the year. Governor of the  Central Bank of Armenia Martin Galstyan voiced a similar forecast on June 11 during a press conference. He noted that the inflation rate will depend on the indicators of the agricultural sector.

According to the head of the Central Bank, the target indicator will  be achieved in the medium term - within the next year. He explained  that the Regulator is trying to pursue a smooth policy without making  any abrupt steps.

"Why am I focusing on the medium term? Because if, for example, we  bring inflation to the target threshold within a year, we can do it,  but what will be the price for the economy?," he noted.  Galstyan  reminded that after the high inflation recorded not only in Armenia,  but also in the whole world, which was caused by overcoming the  epidemic, the Regulator did not sharply increase the refinancing  rate, but was consistent. "We are doing the same now. We are trying  to compare the target indicator, taking into account other facts. And  according to our estimates, we will approach the target indicator in  the medium term. This is reasonable in our opinion," the head of the  Central Bank noted.

He also noted that the projected low inflation is very important for  business, as the driving force of the economy. "If we allowed  inflation to be high, those same businesses would be forced to pay  higher salaries to compensate for high inflation", Galstyan said. 

Today the Board of the Central Bank of the Republic of Armenia  decided to reduce the Refinancing Rate by 0.25 percentage points -  setting it at 8% from 8.25%. In accordance with this, the Lombard  Repo Facility Rate  was set at 9.5% from 9.75%, and Deposit Facility  Rate was set at 6.5% from 6.75%. 

According to the Statistical Committee of the Republic of Armenia,  deflation of 0.8% was recorded in Armenia y-o-y (Jan-May 2024 to  Jan-May 2023), (against inflation of 5.2% a year earlier), provoked  by a 3.9% drop in food prices, with a 2.8% increase in services and  0.1% for non-food products.  In May, inflation decreased from 1.3% to  0.3% due to a drop in prices for the most popular food products.   Thus, in May 2024 compared to May 2023, food products decreased in  price by 1.1%, almost repeating last year's decline of 1.2%.  Moreover, butter, buckwheat, pasta, flour, cereals, cheeses, fish,  sugar, and meat fell in price most noticeably. Services continued to  rise in price, only slowing down in pace to 2.3%, from 4.7% however,  tariffs for car repair/maintenance and organization of recreation  increased significantly.