Central Bank of Armenia reduces refinancing rate from 7.75% to 7.5%

 Gayane Isahakyan. The Central Bank of Armenia (CBA) has reduced the refinancing rate from 7.75% to 7.5%. 

The CBA press service has told ArmInfo that the decision on the 0.25 pct point reduction was taken during the CBA Council's meeting on Feb 11.  

The CBA says that in January 2013 inflation made up 2.8%. In late January 2013 the 12-month inflation reached the upper threshold of the permissible range - 5.5% 

In the last months inflation has been dropping more quickly than expected because of low economic activity and dropping global food prices.

The CBA believes that in the coming months 12-month inflation will continue dropping to go down to the lower threshold of the permissible range due to no more effects from last July's rise in energy tariffs. The CBA says that the situation on the external sector was mostly identical to its early forecasts. The global economic growth is slowly recovering, this resulting in no inflation on international raw material markets and deflation on food markets. So, there will be no inflationary pressures in the near future.

The source says that despite some activeness in the economy in Q4 2013, the economic growth rates are still slow mostly due to the reduction in the added value of the construction sector. The CBA Council thinks that the easing of the monetary policy conditions amid the expansion of the fiscal policy expected for the second half of 2014 and stabilization of private investments will expand the aggregate demand and restore the inflation rates. As a result, by late 2014 the 12-month inflation will reach the target.  

Nevertheless, the CBA Council thinks that there are considerable risks in economic development of the foreign and domestic markets. So, the CBA does not rule out further adjustment of the monetary policy conditions to ensure the target inflation within the mid-term outlook. 

On 24 Dec 2013, the CBA reduced the refinancing rate from 8% to 7.75%. At the same time, lombard repo rates were reduced from 9.5% to 9.25%, and deposit rates - from 6.5% to 6.25%. To note, on November 12, 2013, the refinancing rate dropped from 8.5% to 8%. On the same day the deposit rates dropped from 7% to 6.5%, and the lombard repo rates - from 10% to 9.5%. On 12 April 2011 the CBA reduced the refinancing rate from 8.5% to 8% and retained it till 13 Aug 2013, when the refinancing rate was raised to 8.5% again. The CBA's August decision aimed to curb the nflation expectations and 
dampen the secondary impact of the growth in energy prices. On 13 Aug 2013 the deposit rates were raised from 6.5% to 7%, and the lombard repo rates were retained at 10% till 12 Nov 2013.