Armenia's central bank cut its benchmark rate by 25 basis points to 7.25 percent and repeated that it expects inflation to fall in the third quarter of the year to the lower limit of the bank's tolerance range.
But the Central Bank of Armenia, which has now cut rates twice this year by a total of 50 basis points, added that inflation should start to recover in the second half of the year due to an expected expansion of fiscal policy that should support aggregate demand and inflation.
Armenia's inflation rate rose to 4.4 percent in April from 3.78 percent in March, continuing the decline since hitting a 2013 high of 9.24 percent in August 2013. The central bank targets inflation of 4.0 percent, plus/minus 1.5 percentage points.
Armenia's economy is being hit by the slowdown in Russia and the central bank said it expects a period of low economic growth to continue, mainly due to the slow pace of recovery in the construction sector and industry.
The Gross Domestic Product of Armenia, located to the east of Turkey and west of Azerbaijan, grew by an annual 5.2 percent in the fourth quarter of 2013 for full-year growth of 3.2 percent.
In February the central bank forecast 2014 growth of between 5.4 percent and 6.1 percent, mainly due to better output from industry and services. The International Monetary Fund forecasts 4.3 percent growth this year and 4.5 percent in 2015.