Armenian Interest Rate Cut Further To Boost Slowing Growth

ARMENIAN INTEREST RATE CUT FURTHER TO BOOST SLOWING GROWTH
Venla Sipila

World Markets Research Centre
Global Insight
February 11, 2009

The Board of the Central Bank of Armenia (CBA) yesterday announced
a 25 basis point cut in its policy interest rate, taking the annual
refinancing rate to 6.75%. This decision follows a similar move taken
only in a month before, and a 50-basis-point cut in December. Last
year also saw eight successive monthly decreases of 25 basis points,
the latest of which was implemented in September. The CBA board saw
both domestic and external factors as supportive for a further rate
cut. Falling domestic demand is at present assisting in curbing
Armenian inflation, while cost-side pressure on inflation is also
moderating, in tandem with global price developments. The interest-rate
cut was based on the need to secure financial stability in the current
challenging conditions where economic growth is cooling.

Significance:The further monetary loosening move fits IHS Global
Insight’s expectations. It comes after January inflation data
showed continued moderation in the annual rate of consumer price
growth. Indeed, the first month of the year saw inflation ease to
4.0% year-on-year, just corresponding to the 2009 inflation target
(seeArmenia: 2 February 2000:). With the global financial and economic
crisis reducing the availability of foreign investment and remittance
inflows, easing domestic demand is set to be further reflected
in clearly slowing GDP growth. With the global crisis only having
intensified, inflation pressures in Armenia are also likely to remain
moderate in the near tern, leaving leeway for further interest-rate
cuts by the CBA. However, the Armenian interest rate does not yet
function as a very effective policy tool, but mainly reflects the
CBA’s inflation expectations.

From: Emil Lazarian | Ararat NewsPress

Emil Lazarian

“I should like to see any power of the world destroy this race, this small tribe of unimportant people, whose wars have all been fought and lost, whose structures have crumbled, literature is unread, music is unheard, and prayers are no more answered. Go ahead, destroy Armenia . See if you can do it. Send them into the desert without bread or water. Burn their homes and churches. Then see if they will not laugh, sing and pray again. For when two of them meet anywhere in the world, see if they will not create a New Armenia.” - WS