YEREVAN, JUNE 16, ARMENPRESS. During today’s session the Board of the Central Bank of Armenia made a decision to reduce the refinancing rate by 0.5%, setting it at 4.5%, the CBA told Armenpress.

0.1% deflation was registered in May 2020, compared to the 0.4% deflation in May 2019, in case of which the 12-month inflation has increased and comprised 1.2%.

Due to the novel coronavirus pandemic it is expected that the global economy will record one of the highest declines in its history in the second quarter. Moreover, it is estimated that the global economy recovers at slower pace than expected, and the uncertainty over the further pace of the pandemic is still persisting. At the same time the prices of raw materials are showing some signs of stabilization and restoration conditioned by cautious optimistic expectations of the Chinese economy. It’s expected the external sector will continue having a deflationary impact on Armenia’s economy.

According to the CBA estimations, the economic activity decline in Armenia will deepen in the second quarter due to the factors of the demand and the supply. The decline in supply is especially connected with the decline in the fields of construction and services, whereas the decline in demand will be expressed mainly in the cut of private expenditures both in the consumption and investments.

Taking into account the slow pace of restoration of external and domestic demand, the current low inflationary environment and the negative impact of the high uncertainty, the CBA Board finds it appropriate to reduce the refinancing rate with a bigger step. The Board estimates that in the current situation it would be necessary to keep the expansionary position also in the medium-run under which the inflation will be maintained at a low level in the short-run, approaching the target only at the end of the predicted horizon. The Board also states that in the current situation in line with the promotion of the monetary-credit policy, more promoting fiscal policy is vital for restoring the gross demand.

In case of any risks the Central Bank is always ready to clarify its policy by ensuring the price stability in the medium-run.

Editing and Translating by Aneta Harutyunyan