Armenia`s CB further reduces refinancing rate, from 7.75% down to  7.5%

ArmInfo. The Central Bank of Armenia continues to reduce the refinancing rate, this time also by  0.25 percentage points - from 7.75% to 7.50%. This is already the sixth reduction in the key rate this year, by a total of 1.75 percentage points (from 9.25% in December 2023). 

The decision to further reduce the refinancing rate was made on  September 10 at a meeting of the Central Bank of Armenia Council. In  accordance with this, the rates on Lombard repos have been reduced by  the same amount - from 9.25% to 9%, and on deposits attracted from  banks - from 6.25% to 6%. Thus, over more than a year and a half, the  regulator has reduced the key rate by 3.25 percentage points, in  accordance with which the rates on Lombard repos and on deposits  attracted from banks have decreased by the same amount - from the  maximum of 10.75%, 12.25% and 9.25%, respectively, recorded at the  beginning of 2023. But for now, the current levels of the refinancing  rate, rates on Lombard repos and on deposits attracted from banks are  far from the minimum levels of 4.25%, 5.75% and 2.75%, respectively,  recorded in the second half of 2020.

According to statistics, in August 2024, compared to August 2023,  inflation was recorded at 1.3%, against a deflationary 0.2% in August  2023 compared to August 2022. The basic annual inflation rate  calculated by the Central Bank for August 2024 has not yet been  published, but a year ago in August, annual inflation was recorded at  0.4%. The July basic inflation rate was 0.3% per annum (against  annual core inflation of 0.6% in July 2023).

The detailed rationale for the decision of the Central Bank Council  to reduce the refinancing rate will be presented today at 14:00 at a  press conference by the Chairman of the Central Bank Martyn Galstyan.   It should be noted that the previous reductions in the refinancing  rate in 2024 took place on January 30 - by 0.5 p.p. from 9.25% to  8.75%, on March 12 - by 0.25 p.p. from 8.75% to 8.5%, on April 30 -  again by 0.25 p.p. from 8.5% to 8.25%, on June 11 - again by 0.25  p.p. from 8.25% to 8% and on July 30 - again by 0.25 p.p. from 8% to  7.75%. In accordance with this, the rates on Lombard repos were  reduced to 9.25% from July 30, and on deposits attracted from banks -  to 6.25%, from 10.75% and 7.75%, respectively, at the beginning of  the year.

Before this, in 2023, there were five reductions in the refinancing  rate - from the historical maximum of 10.75% to 9.25% in December.  The Central Bank began to reduce the refinancing rate on June 13,  2023, first by 0.25 percentage points, then on August 1 - by the same  amount, then on September 12 the decrease was more noticeable - by  0.5 percentage points, after which on October 31 the rate was reduced  by 0.25 percentage points and by the same amount on December 12.  Before this, the rate increased for 2 years, reaching a historical  maximum of 10.75% at the end of 2022 and maintaining this level until  June 13, 2023, when the first reduction took place. 

It is worth noting that the refinancing rate was raised to 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 took place in 2022 in February - from 7.75% to 8%, in March  - to 9.25%, in August - to 9.5%, in September - to 10% and in  November - to 10.5%. And from 2021 to and including December 13,  2022, there were twelve increases in the refinancing rate - a total  of from 5.25% to 10.75%. Let us recall that in previous years, the  historical maximum of the refinancing rate was recorded in 2015 -  10.5%, in particular on February 10, having been increased by 1  percentage point - from 9.5% to 10.5%.

In 2021, the Central Bank also raised the refinancing rate six times:  in February (by 0.25 p.p. to 5.5%), in May (by 0.5 p.p. to 6%), June  (by 0.5 p.p. to 6.5%), in August (by 0.5 p.p. to 7%), in September  (by 0.25 p.p. to 7.25%) and in December (by 0.5 p.p. to 7.75%), in  accordance with which, during these periods, the rates on Lombard  repos were increased by the same amount - from the initial 6.75% to  9.25% in December, and on deposits attracted from banks - from the  initial 3.75% to 6.25% in December. And in 2020, the Central Bank  revised the refinancing rate four times downwards and once upwards.  In particular, after the refinancing rate was reduced from 5.5% to  4.25% (March, April, June, September 2020), it was increased to 5.25%  in December. The rates on Lombard repos and on deposits attracted  from banks underwent a corresponding change - to 6.75% and 3.75% in  December.