ARMENIAN INFLATION REACCELERATES IN JULY
by Venla Sipila
World Markets Research Centre
Global Insight
August 4, 2008
Armenian consumer prices increased by 10.7% year-on-year (y/y) in
July, ARKA News reports, quoting the latest figures from the Armenian
National Statistical Service. Thus, inflation accelerated compared
with the respective June and May results of 9.6% y/y and 9.9% y/y,
climbing back to match its April rate. Food price inflation accelerated
to 12.9% y/y after registering an already elevated rate of 10.1% y/y
in June. Service tariffs also continued their rapid gains, rising by
11.1% y/y in July, while prices of non-food goods increased by 6.9%
y/y. Measured month-on-month (m/m), Armenian consumer prices retreated
by 2.2% in July, after falling by 0.5% m/m in June and rising by 1.3%
m/m in May. The clear fall in July was brought about by a significant
decrease in the cost of food in m/m comparison. Consumer prices have
increased by 4.5% cumulatively during the January-July period, while
the annual inflation rate of the first seven months of the year came
in at 9.2% y/y.
Significance:The reacceleration of annual inflation is discouraging,
while the clear m/m fall in food prices in July represents welcome
news. It still seems likely that the official inflation target of 4%
(with 1.5% on either side) this year will prove too optimistic. The
Central Bank of Armenia (CBA) has fought rapid inflation by several
consecutive interest rate rises, the latest taking the policy rate
up by 25 basis points to 7.25% in July (see Armenia: 3 July 2008:
). A further rise may follow the publication of July inflation
data. However, with the effect of interest-rate increases remaining
limited in the undeveloped financial environment, the key means for
curbing inflation for the CBA remains letting the dram appreciate
considerably, as robust remittances and investment inflows continue
to boost foreign currency inflows. Indeed, in addition to strong
inflation pressure from the cost side via increased energy and food
prices, demand-side factors also continue to play a role in boosting
Armenian inflation. The International Monetary Fund (IMF) recently
stated that fiscal restraint would be crucial in containing near-term
inflationary pressures (see Armenia: 23 June 2008: ).
From: Emil Lazarian | Ararat NewsPress
