Tuesday, August 7, 2012

Armenia keeps rate steady at 8.0%, sees price pressures

   The Central Bank of Armenia (CBA) kept its benchmark refinancing rate unchanged at 8.0 percent to guard against higher inflation from stronger domestic demand and higher wheat prices.
    The central bank, which has kept interest rates unchanged since September 2011, acknowledged that prices had fallen by 1.5 percent in July from the previous month for a year-on-year inflation rate of 2.3 percent, at the lower end of its target range of 4 percent, plus or minus 1.5 percentage point.

    However, the CBA said in a statement that it was anticipating higher wheat prices due to dry weather in Russia, Kazakhstan and the United States. In addition, private consumption was growing fast, helped by strong lending.
   "Moreover, private consumption will possibly be growing farther in the upcoming months, pushing aggregate demand up and creating a potential for inflation," the CBA said.

    The CBA said it still expected inflation to remain within its target band over its one-year horizon.
   Adverse weather in many of the world's major wheat growing areas, such as Russia, Kazakhstan,  Australia, Argentina and China, has cut wheat production, boosting prices. In addition, drought in the U.S. has hit corn crops and livestock farmers there are expected to turn to wheat for feed, pushing up prices further.


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