Tuesday, October 29, 2019

Armenia holds rate, keeps easy stance on low inflation

    Armenia's central bank kept its benchmark refinancing rate at 5.50 percent but said it would maintain a stimulative monetary position as inflation is expected to remain below the target in coming months before gradually returning to it in the medium term.
     The Central Bank of Armenia (CBA), which has lowered its rate twice this year, added the decision to maintain the rate today reflected the lack of inflationary pressures from abroad, the expected impact of fiscal policy and the gradual recovery in inflation.
     CBA cut its rate by a total of 50 basis points this year following cuts in September and January.
     Headline inflation in Armenia fell slightly to 0.5 percent in September from 0.6 percent in August while core inflation eased to 1.3 percent in August from 1.5 percent in July.
     CBA targets inflation of 4.0 percent, plus/minus 1.5 percentage points.
      In September CBA attributed the low inflation rate in recent months to a seasonal decline in agricultural prices that reflects international commodity prices.
     CBA said today it was ready to respond adequately to ensure price stability in light of the downward risk to inflation, mainly due to external developments and fiscal policy.
     Economic activity in the third quarter remained at a high level, with private consumption driving domestic demand, supported by monetary stimulus and injection of liquidity, CBA said. Although stimulus from fiscal policy had expanded in the third quarter, its impact on domestic demand is still seen as contained.
    In the second quarter of this year Armenia's gross domestic product grew 6.5 percent year-on-year, down from 7.2 percent in the first quarter.
     Armenia's dram firmed steadily from March through August but since then it has moved sideways and was trading at 475.6 to the U.S. dollar today, up 1.7 percent this year.




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