Armenia’s central bank cuts rates again as deflation deepens

By bne IntelliNews September 28, 2016

Armenia's central bank has decided to cut its refinancing rate by 50 basis points (bp) to 6.75% to stave off deflation, the regulator said on September 27. Deflation in Armenia deepened from 1.3% y/y in July to 1.9% y/y in August, prompting the monetary policy intervention, it added.

Unlike its regional peers, Armenia has enjoyed relative monetary stability in recent years, following a 14% depreciation of the dram in December 2014. As such, inflation has remained within the government's target of 2.5% to 5.5%. Over the past six months, however, consumer prices have stayed in negative territory, prompting the regulator to cut key rates five times between March and August, lowering it from 8.75% in March to 7.25% in August or by 25 bp in each intervention.

Last week, the central bank decided to lower banks' foreign currency reserve requirement from 20% to 18%, following a cut in the requirement from 24% to 20% in December. Previously, the regulator doubled the requirement to 24% in December 2014 in order to bolster the Armenian dram, which was quickly depreciating, and to curb currency speculation.

In an editorial on September 27, the Armenian Time daily has speculated that the central bank's changing monetary policy is aimed at supporting the newly-appointed prime minister, Karen Karapetyan. The new premier is looking to support the business environment and to encourage lending. Some of the reforms he has proposed have been unpopular with the more established members of his cabinet. Referring to the foreign reserve requirement, the newspaper wrote that the requirement had not been changed for one year and eight months, and that recent economic developments did not necessitate such a change. Instead, political motives were behind the regulator's decision. 

Related Articles

World Bank improves Eurasian growth forecasts

Eurasian economies are set for a modest recovery next year with growth projected to accelerate to 3.3% in Central Asia from 2.0% expected for 2016, the World Bank said in a new report released on ... more

Armenian business tycoon goes back on vow to run in parliamentary elections

Ara Abrahamyan, a Russia-based Armenian business tycoon, has announced that he will not be running in the country's parliamentary elections in 2017, going back on his earlier word, Radio Free Europe/ ... more

Armenian government passes bill criminalising corruption among high-ranking officials

The Armenian government approved a draft bill to criminalise the “illegal enrichment” of high-ranking state officials on November 18, Radio Free Europe/ Radio Liberty (RFE/RL) reported. The ... more

Register here to continue reading this article and 2 more for free or 12 months full access inc. Magazine and Weekly Newspaper for just $119/year.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

IntelliNews Pro subscribers click here

Thank you. Please complete your registration by confirming your email address. A confirmation email has been sent to the email address you provided.

Thank you for purchasing a bne IntelliNews subscription. We look forward to serving you as one of our paid subscribers. An email confirmation will be sent to the email address you have provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

IntelliNews Pro subscribers click here

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

Thank you. Please complete your registration by confirming your email address. The confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss