Armenia’s central bank lowered its refinancing rate by 25 basis points to 5.50 percent, reiterating that it expects to maintain a stimulative monetary policy stance in the medium term to achieve its inflation target due to the deflationary impact from the external sector, where economic growth and inflation is slowing.
The Central Bank of Armenia (CBA), which has now cut its rate twice this year following a cut in January for a total decline of 50 basis points, also said it expects inflation to remain below its target of 4.0 percent, plus/minus 1.5 percentage points, in coming months before stabilizing around the target in the medium term.
Armenia’s inflation rate slumped to 0.6 percent in August from 1.7 percent in July, partly due to a seasonal decline in agricultural prices that is also reflecting international commodity markets.
Economic activity in Armenia remained high in the third quarter, largely driven by growth in processing industries and private consumption while fiscal policy is acting as a brake on demand.
Armenia’s dram rose steadily from March through August and has remained stable this month, trading at 476.6 to the U.S. dollar today, up 1.5 percent this year.
Aided by a pickup in private investment and private remittances, Armenia’s economy grew 5.2 percent last year and 6.5 percent year-on-year in the second quarter of this year.
In late May the International Monetary Fund forecast growth of a more sustainable 4.6 percent this year and stabilize around 4.5 percent in the medium term, with fiscal consolidation remaining on track to bring government debt below 50 percent of gross domestic product in the medium term.