Weak inflationary effects on Armenian economy from global economy expected – Central Bank

YEREVAN, NOVEMBER 1, ARMENPRESS. In September, 2022, the 12-month inflation in Armenia rose amounting to 9.9%. The 12-month core inflation also increased, reaching 10.5%, Governor of the Central Bank Martin Galstyan said during a press conference.

“Slowing trends of economic activity are observed in the global economy. The central banks of advanced countries continue to significantly tighten monetary conditions. This is expressed by a certain drop in prices in international commodity markets, however, headline inflation in the main partner countries of Armenia is still high”, he said.

The CBA Governor said that weak inflationary effects on the Armenian economy from the global economy are expected.

“In the third quarter of 2022, the trends of high activity in the Armenian economy are persisting. The economic growth primarily bears the positive effects of external demand, reflected as a significant increase in the services sector. Continued increase in the inflow of international visitors and money transfers from the Russian Federation contributes to the expanding of demand. This is also expressed in the improvement in Armenia’s external balance position and dram exchange rate appreciation. High demand also contributes to the heating of labor market, the expanse of overall inflationary environment and persistence of high inflation expectations. In current circumstances, the conduct of contractionary and coordinated fiscal and monetary policy is important”, the CBA Governor said.

He added that a relatively tightening monetary policyand the dram appreciation will gradually contribute to containing demand and reducing inflationary expectations.

“The Board of the CBA will be consistent in taking adequate actions to stabilize inflation and absorb any risk of de-anchoring inflation expectations. In accordance with the monetary policy scenario, the 12-month inflation will gradually decrease and stabilize around the 4% target in the medium run.

The Board of the CBA estimates that the risks of inflation deviating from the projected path are mainly balanced; should such risks materialize in either direction, the CBA will respond accordingly to fulfill the price stability objective”, he stated.

Earlier today the CBA Board decided to raise the refinancing rate by 0.5 percentage point, setting it at 10.5%.