The Central Bank of Armenia (CBA) held its benchmark refinancing rate steady at 8.0 percent in light of a weak inflationary environment with the annual inflation rate expected to approach the bank's 4 percent target and remain around that level over the three-year forecast horizon.
CBA, which has held its refinancing rate steady since September 2011, said inflation rose by 1.4 percent in November for an annual increase of 3.6 percent, close to its confidence band. In October the annual rate was 3.4 percent.
Armenia's economy has developed largely in line with the central bank's policy program which forecasts weak global demand yet a fundamental tightness in world food markets. This will have a minor inflationary impact on domestic prices, the CBA said.
"In view of the actual 12-month inflation behavior as well as persisting weak inflationary environment in the prospect of developments in external sector and the domestic economy, the board finds it reasonable to further withhold from changing the refinancing rate in December," the CBA said in a statement following a meeting of its board on Dec. 11.
In the October-November period, the bank said private spending was strong, non-commercial transfers by individuals were high while the impact of fiscal policy on demand was contractionary.
Armenia's Gross Domestic Product rose by an annual rate of 6.6 percent in the second quarter.
In its monetary policy program, the central bank said there was a high probability that 2012 economic growth would be 7-7.4 percent, driven by higher value-added in services, industry and agriculture.
Over the next two years, the bank forecasts growth stabilizing at 5-6 percent annually with 2013 real domestic demand up by 4.8 percent and public spending up by a real 7.4 percent.