Tuesday, February 10, 2015

Armenia raises rate another 100 bps, inflation seen rising

    Armenia's central bank raised its benchmark refinancing rate by another 100 basis points to 10.50 percent in a move to reduce short-term interest rates around 14.5 percent, helping ensure stability in financial markets and the bank's medium-term inflation objective.
    It is the second consecutive rate rise by the Central Bank of Armenia (CBA) this year and the third since December.
    The CBA, which has now raised its rate by 375 basis points since December, noted that inflation eased to 2.5 percent in January from 4.55 percent in December for a 12-month rate of 4.3 percent, close to its target.
    In coming months, inflation is seen rising slightly due to the comparison to low base.
    Citing the high volatility in currency markets, the CBA said the risk of investing in developing countries had risen against the backdrop of an acceleration on U.S. economic growth.
    Armenia's currency, the dram, has been dragged down by Russia's economic crises, which has led to a fall in remittances. Russia is Armenia's main trading partner.
    The dram fell sharply from early November 2014 to mid-December but since then it has stabilized. Today it was quoted at 478.8 to the U.S. dollar, down less than 1 percent since the start of the year.



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