Armenia's central bank held its benchmark refinancing rate steady at 10.50 percent, citing a slowdown in inflation in May to 5.1 percent from 7.75 percent in April and expectations of further impact on inflation from external factors in coming months.
The Central Bank of Armenia (CBA), which has raised its rate by 375 basis points since December following a sudden plunge in the dram's exchange rate, said it expects inflation to stabilize around its target next year following the impact of the rise in electricity tariffs in August.
CBA targets inflation of 4.0 percent, plus/minus 1.5 percentage points.
The dram currency was dragged down in late November by Russia's economic crises, its main trading partner, which led to a sharp fall in remittances.
Following three rate hikes, the dram stabilized and was trading at 473.1 to the U.S. dollar today, up 0.4 percent since the beginning of the year.
The central bank added that macroeconomic stability achieved early this year was continuing to contribute to the recovery of economic activity, with growth of 2.7 percent in the activity index in the January-May period due to progress in agriculture and industry.
Last month the central bank revised upward its forecast for economic growth this year for Gross Domestic Product to expand by 1.6-2.6 percent, up from its earlier forecast of 0.4-2.0 percent.
In the first quarter of this year, Armenia's GDP grew by an annual rate of 2.2 percent, below the fourth quarter's 2.6 percent.