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The Central Bank of Armenia (CBA) will respond in a “strong and unconventional” manner if Russia decides to increase the price of natural gas supplied to Armenia, CBA Governor Martin Galstyan said Tuesday.
Speaking at a press briefing, he noted that the CBA Board does not disregard the possibility of a change in the price of gas in its discussions.
According to him, a possible price hike could have a dual effect.
“First, it could have a primary effect related to an increase in the overall inflation rate. And second, a secondary effect, because the price of gas may also be included in the cost of other goods, products, and so on, and, naturally, this could also bring with it a certain Type B risk related to a downturn in our economy. Therefore, we have had that scenario in mind, but from our perspective, it is a Type X scenario, which implies something more apocalyptic and to which our response should be stronger and unconventional. At this point, we are proceeding along our normal course, while keeping in mind the possibility of such problems,” he said.
The CBA Board considers the prospect of slower global economic growth, the emergence of deflationary risks due to restrictions on exports to Russia, and a fundamental decline in Armenia’s risk premium to be a Type B risk scenario for Armenia. These factors imply setting the policy interest rate at a lower level than market expectations.