YEREVAN, September 11. /ARKA/. Armenia’s Central Bank has decided today to cut its key refinancing rate by 0.25 percentage points, setting it at 5.5%.
It said in August 2019, prices dropped by 0.4%, facilitated largely by a higher seasonal decline in agricultural produces’ prices. As a result, the 12-month inflation continued to decline, reaching 0.6% at the end of the month. Unlike overall inflation, the natural inflation in recent months has demonstrated relatively stable behavior, fluctuating around 1.5%, it said.
Armenia’s Central Bank said also it expects largely deflationary impact from international commodity markets because of increasing uncertainty regarding the world economy against the background of slowing economic growth, demand and inflation.
The regulator recalls that the economic activity in the third quarter continues to be high, driven mainly by the growth in the services sector and the processing industry along with increasing private consumption. It said the fiscal policy continues to have a chilling effect on gross demand.
‘Considering the deflationary environment that has formed in the external segment and the course of fiscal policy, the Bank prefers a gradual recovery of inflation. It also considers it appropriate to increase the stimulation of monetary conditions by lowering the refinancing rate, and also discusses measures to channel financial resources into the development of the economy’s potential.’
The Central Bank also believes that in the context of projected macroeconomic developments, it will be necessary to maintain a stimulating position also in the medium term in order to achieve the inflation target. As a result, inflation is expected to remain to a lower target in the coming months, stabilizing around it in the medium term.