Tuesday, December 26, 2017

Armenia holds rate, still sees tightening in near future

      Armenia's central bank left its benchmark refinancing rate at 6.0 percent, citing the need to maintain the current level of monetary stimulus conditions to help the economy but confirmed that it still believes it will be necessary to gradually neutralize this monetary stimulus in the near future so inflation reaches the target.
      The Central Bank of Armenia (CBA) has maintained its rate since February after cutting it 12 times by a total of 450 basis points from 10.50 percent in August 2015.
       Armenia's inflation rate rose to 2.2 percent in November from 1.2 percent in October for the highest rate since September 2015 but is expected to be in the lower limit of the central bank's tolerance range of 2.50 - 5.50 percent (around a 4.0 percent midpoint) by the end of this year.
       Last year consumer prices fell by 1.1 percent as the former Soviet Republic was hit by Russia's economic crises and a decline in remittances from Armenia's abroad.
       In November the CBA's board also warned it would necessary to gradually neutralize monetary stimulus in the near future so inflation reaches its target, a message also seen in its latest inflation review from last month when it cited growing domestic demand.
       CBA said the external sector had developed largely in line with its predictions and inflation is expected to expand in line with the expansion of external demand.
       Economic activity in Armenia from January to September has "considerably exceeded expectations" on high growth in services and industry, the CBA said, with domestic private demand also expected to be higher than expected, boosting trade, imports and inflation expectations.
       Armenia's Gross Domestic Product grew by an annual 3.5 percent in the third quarter of this year, down from 5.5 percent in the second quarter but compared with a contraction of 2.6 percent in the third quarter of 2016.
       After collapsing in November 2014, Armenia's dram has been more stable in recent years and was trading at 480.6 to the U.S. dollar today, up 0.7 percent this year.



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