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IMF: Temporary Increase In Interest Rates To Enhance Confidence In A

IMF: TEMPORARY INCREASE IN INTEREST RATES TO ENHANCE CONFIDENCE IN ARMENIAN BANKING SYSTEM

ARKA
March 4, 2009

YEREVAN, March 4. /ARKA/. Temporary increase in interest rates will
help to enhance confidence in Armenian banking system, by rewarding
Armenians for keeping their money in the banks, IMF residence office
in Armenia said on Tuesday.

"Second, it can help to reduce the inflationary pressures that are
likely to result from the depreciation, and sends a signal that the
central bank is still serious about inflation. Finally, it will help
to reduce incentives for banks to engage in speculative behavior,
because it will become more expensive for banks to borrow dram from
the central bank", the IMF said in its report.

Board of the Central Bank of Armenia has raised refinancing interest
rate 1.0 percentage points to 7.75%, Central Bank Chairman Arthur
Javadyan said on Tuesday.

He told journalists that the decision was prompted by the fact that
crises-caused deflation environment on world markets and slowing
growth in domestic demand foster low inflation. Nevertheless, he said,
risks of increase in target inflation indicators are becoming very
likely amid devaluating currency.

The previous change in refinancing interest rate was made on February
10. It was driven 0.25 percentage points down to 6.75%.

Ekmekjian Janet:
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