ArmInfo.The increased risks of a stronger external inflationary impact amid the geopolitical escalation in the Middle East are raising the likelihood of a tighter monetary policy trajectory for the Central Bank of Armenia than previously anticipated, as noted in the weekly macro review by the Eurasian Development Bank (EDB).
The same macro review mentions that on June 17 of this year, the Central Bank of Armenia left the refinancing rate at 6.75%. On that same day, the Regulator also noted that inflation expectations and the growth of service prices in Armenia had stabilized.
Let us recall that prior to the press conference on the refinancing rate on June 17, the head of the Central Bank of Armenia, Martin Galstyan, said in the National Assembly of Armenia on the same day: "The factor of the Iran-Israel conflict may lead to an increase in the refinancing rate. We live in a time and region where risks are incomparably higher, and this should have been reflected in the refinancing rate, which should have been higher. Our most important task is to maintain macroeconomic stability. In this regard, Armenia is the point where this stability is upheld. We have a low budget deficit, public debt below 50%, established tax regulations and a low inflation rate. In other words, we have a solid foundation on which to build structural reforms in infrastructure, education, science, sports, to attract investments to the country." He pointed out the fact that the Central Bank, in its decision of June 17, left the refinancing rate at the existing level of 6.75%, taking into account even the unpredictable nature of the Iran-Israel conflict.
Commenting on the impact of the escalation of the Iran-Israel conflict on the stability of Armenia's banking system, the head of the Central Bank of Armenia noted: "Currently, the banking system of Armenia does not have any issues in countering possible risks." Touching upon the increase in the level of capitalization of banks to maintain the stability of the financial system, he recalled that the Central Bank has tightened the countercyclical capital buffer since May 2025 - from 1.5% to 1.75% of risk-weighted assets: "We are talking about approximately additional capital of 150 billion drams, and in this context, given that we are closely monitoring the situation, I think we do not have any issues in countering risks," the head of the Central Bank emphasized. It was noted that in the context of ongoing geopolitical uncertainty, the probability of materialization of systemic (cyclical) risks remains high, and the use of this surcharge is aimed at supporting the stability of the banking sector. In addition to the countercyclical capital buffer, there are also regulatory surcharges to the capital adequacy level, such as the capital conservation buffer (protective) - increased from 2% to 2.5% from May 2025, and for systemically important banks - an additional capital buffer at the level of 1.5%.
