Armenia cenbank signals gradual change in its monetary policy

YEREVAN, Nov 30 (Reuters) – Armenia‘s central bank said on Thursday it planned gradual change in its monetary policy amid possible inflationary risks.

The ex-Soviet country‘s central bank launched a monetary easing cycle two years ago to prop up both consumer demand and inflation, but said in March it would be more cautious when cutting rates because of the potential economic and financial risks that lower rates carry.

The bank last trimmed the refinancing rate to 6 percent from 6.25 percent in mid-February and has since kept it unchanged.

“It will be necessary to neutralise monetary policy‘s stimulating conditions gradually in order to reach annual inflation target in mid-term,” the bank said in its inflation review.

The bank said it expected annual inflation to get closer to the target range of 4 percent plus/minus 1.5 percent helped by a restoration in consumer demand and a boost to economic growth.

Gross domestic product grew by 3.5 percent in the third quarter, as against a contraction of 2.6 percent in the same period last year, official data showed.

Consumer prices in Armenia rose by 0.8 percent in October, month-on-month, and by 1.2 percent year-on-year.

Armenia‘s Finance Minister Vardan Aramyan told Reuters in September he expected annual inflation to enter the target range in 2017 and dip under 4 percent in 2018.

Annual deflation in 2016 was 1.1 percent as Armenia felt the pain from an economic crisis in Russia, which hit consumer demand as remittances from Armenians working in its former Soviet ruler went down. (Reporting by Hasmik Mkrtchyan; writing by Margarita Antidze; Editing by Matthew Mpoke Bigg)