Armenia's central bank maintained its benchmark rate at 7.5 percent and said inflation was expected to continue to decline in the third quarter to the lower limit of the bank's tolerance range.
The Central Bank of Armenia (CBA), which cut its rate by 25 basis points in February, said lower economic growth was mainly due to the construction industry but aggregate demand should improve in the second half of the year due to the impact of lower interest rates and expansionary fiscal policy.
Armenia's headline inflation rate eased to 4.6 percent in February, the central bank said, from January's 5.53 percent, continuing its decline since hitting a recent high of 9.24 in September.
Armenia's Gross Domestic Product expanded by 5.2 percent in the fourth quarter of 2013 from the same 2012 quarter for average growth last year of 5.1 percent.
The central bank in February projected 2014 growth of between 5.4 percent and 6.1 percent, mainly due to better output from industry and services.
The International Monetary Fund (IMF), which has approved a 38-month US$127.6 million facility to support the country's economy, projects 4.3 percent growth in 2014 and 4.5 percent in 2015.
The central bank targets annual inflation of 4.0 percent, plus/minus 1.5 percentage points.