Armenia's central bank cut its benchmark repurchase rate by 25 basis points to 7.0 percent, its third cut this year, and said it expects inflation to continue to ease in the coming months with the rate dropping below the bank's lower acceptable limit in the third quarter.
The Central Bank of Armenia (CBA), which has now cut its rate by 75 basis points this year, targets inflation at a midpoint of 4.0 percent within a range of plus/minus 1.5 percentage points.
Armenia's inflation rate eased to 3.6 percent in May from 4.4 percent in April and has been on a declining trend in the last nine months.
The CBA, which has forecast inflation this year of 2.5-5.5 percent, said inflation should improve in the fourth quarter of this year, helped by an expansionary fiscal policy and easier monetary policy.
The Gross Domestic Product of Armenia, located to the east of Turkey and west of Azerbaijan, expanded by an annual rate of 3.1 percent in the first quarter of this year, down from the fourth quarter's rate of 5.1 percent. In 2013 the economy expanded by 3.2 percent.
In May the central bank revised downwards it growth forecast for 2014 to 4.1-4.8 percent from a previous forecast of 5.4-6.1 percent, mainly due to worsening conditions in Russia, Armenia's major trading and investment partner, and the delayed commission of the Teghut copper mine.