YEREVAN, SEPTEMBER 10, ARMENPRESS. The Board of the Central Bank of Armenia made a decision today to lower the refinancing rate by 0.25%, setting it at 5.5%, the CBA told Armenpress.

The Board said that in August 2019 0.4% deflation was recorded against the 0.6% inflation of the same month of 2018, which again was greatly contributed by the major seasonal decline of prices of agricultural goods. As a result, the 12-month inflation continued to decline, comprising 0.6% at the end of the month. Compared to the overall inflation, the normal inflation showed a relatively stable behavior in recent months, fluctuating within 1.5%.

In the external sector, under the increase in uncertainty over global economic developments, major slowdown trends in economic growth, demand and inflation are being recorded which are also reflected in international commodity markets. Based on the aforementioned the CBA Board estimates that overall deflationary effect is mainly expected from the external sector.

The Board records that in the third quarter of 2019 Armenia’s economic activity remains high which is mainly conditioned by the growths in services and reprocessing industry in terms of supply, but as for the demand, by the growth in private consumption. At the same time, the fiscal policy still has a restraining affect on the gross demand.

Taking into account the deflationary environment in the external sector and the process of fiscal policy, as well as giving preference to the gradual recovery of inflation, the CBA Board finds it appropriate to increase the expansionary rate of monetary-loan terms, lowering the refinancing rate. The Board also states that in the conditions of predicted macroeconomic developments it will be necessary to keep the expansionary position in the medium-run for the implementation of inflation goal. As a result, the expectation is that inflation will still be running below the lower part of the confidence band and stabilizing around the targeted figure in the medium-run.

Edited and translated by Aneta Harutyunyan