CBA RAISES REFINANCING RATE BY 0.25 PERCENTAGE POINTS
YEREVAN, AUGUST 1, NOYAN TAPAN. At the July 31 sitting, the Central
Bank of Armenia (CBA) Board made a decision to raise the refinancing
(repo) interest rate by 0.25 percentage points to 4.25%, presenting
this step as a measure aimed at neutralizing the inflation risks. This
is a second change of such a kind this year after the refinancing rate
was raised from 3.5% to 4% in January. According to the CBA Board, the
registration of a two-digit economic growth is entirely realistic under
conditions of the continuing tendencies of the economic development,
however, the risks of deviating from the target index of 3% inflation
remain, and "their manifestation is becoming more likely".
According to a CBA press release, there are risks that international
prices of raw materials, particularly oil products and metals may
grow above the expected level, which is mainly conditioned by a
possible depreciation of the US dollar and further straining of the
geopolitical situation. A growth in the prices of grain imported into
Armenia is also possible in connection with an expected harvest decline
in Russia and Ukraine. Most proportional growth in the incomes of
the construction and service sectors at a higher rate than envisaged
may also create risks of exceeding the target inflation index. The
anticipated considerable budget expenditures until late 2006 may
contribute to inflation as well, which will become evident in the first
half of 2007. Yet another factor is the increase in the water supply
and sewerage tariffs on July 1, 2006. Therefore, the CBA Board does
not exclude another change in the interest rates in the coming months.
From: Emil Lazarian | Ararat NewsPress
