Tweet
CENTRAL BANK OF ARMENIA KEEPS INTEREST RATES STABLE AS INFLATION RISKS EASE
BYLINE: Venla Sipila
Global Insight
June 8, 2011
The Central Bank of Armenia (CBA) has in June decided to keep its
refinancing interest rate at 8.5%, Reuters reports. This follows a
similar decision in May, after increases in the policy rate had been
implemented in each of the three previous months (seeArmenia: 13 April
2011:). The central bank took the decision stating that it did not see
it likely that inflation would accelerate. The CBA's decision closely
follows publication of the latest inflation data by the Armenian
National Statistical Service. These figures show that consumer prices
in May remained unchanged on average from April. Meanwhile, marginal
acceleration from 8.9% year-on-year (y/y) in April took the annual
inflation rate to 9.0%, which still is considerably lower than the
11.5% y/y gain seen in March. Inflation developments were driven by
food prices, which remained stable compared to April, while they still
provided for the fastest annual gain among different price categories.
The CBA has earlier projected that Armenian inflation will ease back
to the target range of 4.5% with a band of 1.5 percentage points on
either side within the second half of 2011.
Significance:Even as monthly deflation in March did not continue and
annual inflation did not moderate further, we share the CBA's view that
inflation pressures in Armenia at present are easing. Food prices play
an important role in the Armenian consumption basket, and the recent
easing of price pressures from these is welcome news. In addition
to the direct impact on the outlook for macroeconomic stability,
this also suppresses the risks that rapid food price gains might even
have lead to some social unrest. The expectations of easing--even if
still notable--inflation pressures seem warranted.
However, y/y inflation still remains significantly above target,
and thus, rapid price gains still remain a source for concern.
BYLINE: Venla Sipila
Global Insight
June 8, 2011
The Central Bank of Armenia (CBA) has in June decided to keep its
refinancing interest rate at 8.5%, Reuters reports. This follows a
similar decision in May, after increases in the policy rate had been
implemented in each of the three previous months (seeArmenia: 13 April
2011:). The central bank took the decision stating that it did not see
it likely that inflation would accelerate. The CBA's decision closely
follows publication of the latest inflation data by the Armenian
National Statistical Service. These figures show that consumer prices
in May remained unchanged on average from April. Meanwhile, marginal
acceleration from 8.9% year-on-year (y/y) in April took the annual
inflation rate to 9.0%, which still is considerably lower than the
11.5% y/y gain seen in March. Inflation developments were driven by
food prices, which remained stable compared to April, while they still
provided for the fastest annual gain among different price categories.
The CBA has earlier projected that Armenian inflation will ease back
to the target range of 4.5% with a band of 1.5 percentage points on
either side within the second half of 2011.
Significance:Even as monthly deflation in March did not continue and
annual inflation did not moderate further, we share the CBA's view that
inflation pressures in Armenia at present are easing. Food prices play
an important role in the Armenian consumption basket, and the recent
easing of price pressures from these is welcome news. In addition
to the direct impact on the outlook for macroeconomic stability,
this also suppresses the risks that rapid food price gains might even
have lead to some social unrest. The expectations of easing--even if
still notable--inflation pressures seem warranted.
However, y/y inflation still remains significantly above target,
and thus, rapid price gains still remain a source for concern.