CENTRAL BANK OF ARMENIA LEAVES INTEREST RATE UNCHANGED IN OCTOBER
by Venla Sipila
World Markets Research Centre
Global Insight
October 6, 2008
The Central Bank of Armenia (CBA) has decided to leave its policy
interest rate, the annual refinancing rate unchanged at 7.75% in
September, ARKA News reports. The decision follows eight successive
months of 25-basis-point interest rate rises, the latest of those
having taken place in September (see Armenia: 3 September 2008:
). The CBA based its October decision to leave the policy rate stable
on weakening external inflation pressures in the third quarter of
the year, noting that domestic prices for fuel and some foods have
decreased. In addition, the CBA indicates that inflation pressures
from domestic demand remained modest. The board of the CBA sees that
while fuel and food prices are only easing slowly, this development
should continue. The latest inflation data for Armenia showed annual
price growth moderating to 11.3% in September, after standing at 11.5%
in August (see Armenia: 3 October 2008: ).
Significance: Easing of annual inflation is likely to continue in
Armenia, with moderating world market prices of commodities. However,
the CBA would be well advised to be cautious in further monetary
loosening, before further signs of easing of domestic demand-side
pressures are seen. Armenian economic growth still remains in double
digits, and is driven by domestic spending, boosted for example by
fiscal expenditures.