Central Bank cuts refinancing rate by 0.25%, sets it 6.5%

YEREVAN, NOVEMBER 15, ARMENPRESS. On November 15 the Board of the Central Bank made a decision to cut the refinancing rate by 0.25% setting it at 6.5%, the press service of the Bank told “Armenpress”.

0.5% inflation has been registered in October 2016 compared to the 0.4% deflation of the same period of 2015. The 12-month deflation comprised 0.9%.

According to the CB estimations, the deflationary environment will continue mitigating until the end of this year.

A slow pace of global economic growth was maintained in the external sector, and minor inflationary trendswere registered in international commodity markets. Nevertheless, the CB Board estimates that inflationary effects from the external sector are not likely in the upcoming months.

The CB Board notes that the economic activity paces continue to slow down, which are mainly linked with the supply factors, such as the slow pace of the growth of industrial and agricultural sectors, and the promoting monetary and fiscal policies which were carried out in 2015-2016 are mainly contributing to restoring the domestic demand.

In the third quarter of 2017 reduction in gas and electricity tariffs is expected, which is a supply factor and will lead to a certain reduction in inflation only in a short-run.

Nevertheless, the CB Board states that the deflation risks are maintained in the medium term, and currently the 2017 fiscal policy factor was added to it. In these circumstances, the CBA Board finds it reasonable to continue easing the monetary conditions.

This will help the deflation environment to largely phase out in the upcoming months and the 12-month inflation rate to return to its target in the forecast horizon.

At the same time, in case of additional risks, the CB will adequately respond by ensuring the implementation of the inflation target in the medium-term.