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Armenian Inflation Remains Rapid In January

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  • Armenian Inflation Remains Rapid In January

    ARMENIAN INFLATION REMAINS RAPID IN JANUARY
    by Venla Sipila

    Global Insight
    February 6, 2008

    According to the latest data from the Armenian National Statistical
    Service, consumer prices in the country increased by 6.6% year-on-year
    (y/y) in January, ARKA News reports. Thus, the annual inflation rate
    remained level with the December result, when it modestly eased after
    reaching 6.8% y/y in November. Inflation was driven by a surge of 10.3%
    y/y in food prices, while prices of non-food goods rose by 4.0% y/y and
    service prices increased by 3.0% y/y. Inflation measured month-on-month
    (m/m) accelerated to 2.4% in December, after registering 1.5% m/m
    in December and 2.1% m/m in November. Also monthly developments were
    characterised by rapidly rising food prices; indeed, the cost of food
    surged by 4.4% m/m in January, while prices of non-food goods grew
    by 0.5% m/m and service charges edged up by 0.2% m/m.

    Significance:Seasonal effects typically drive inflation up in January;
    indeed, the m/m gain of 2.4% seen in consumer prices in January
    matches the m/m inflation rate in January last year. In particular,
    vegetable and fruit prices tend to increase in winter months. However,
    food prices have in recent months put strong upward pressure on
    prices also in annual comparison, notably due to higher world market
    prices for grains. Also high commodity prices are contributing to
    inflation. However, as Armenian growth is finally expected to cool
    somewhat after a prolonged very strong period, price pressure from the
    demand side should somewhat ease this year, although still remaining a
    clear factor in boosting inflation. As the inflation targeting policy
    of the Central Bank of Armenia has implied strong dram appreciation
    at times of robust foreign remittance inflows, moderating demand and
    the consequent easing of price pressure will also be reflected in
    somewhat curbed currency strengthening pressure.
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