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ARMENIAN INTEREST RATES REMAIN STABLE AS INFLATION REMAINS WITHIN TARGET RANGE
by: Venla Sipila
Global Insight
February 9, 2012
The Central Bank of Armenia (CBA) has in its February meeting
decided to keep its refinancing interest rate unchanged at 8%,
Reuters reports. The last rating revision was a cut in September, when
inflation eased within the CBA's target band. The decision follows the
latest inflation data from the National Statistical Service showing
that consumer prices in January increased by 4.8% year-on-year (y/y),
the annual inflation rate thus edging back to its November 2011 level,
following a rate of 4.7% y/y posted in December. Food prices started
the year up 6.0% y/y, while January saw non-food good prices rising
by 3.6% y/y and service tariffs gaining 3.5% y/y. In month-on-month
(m/m) comparison, prices in January increased by 3.6%. Annual inflation
last year averaged 7.7% (seeArmenia: 11 January 2012:).
Significance:The year started with the inflation rate clearly within
the target range set by the CBA at 4% with a variation band of 1.5
percentage points on either side. At present, we expect that inflation
will be contained within this range in the coming months and quarters.
Demand-side inflation pressures should remain fairly weak, and the
overall growth outlook subject to downward risks in the current
external environment. High commodity prices are still supporting
mining sector export revenues, but the uncertain outlook for
important remittance inflows, also implies inflation risks. Indeed,
in the case of a marked deterioration in current transfer flows,
financial stability in the still very dollarised economy might be
jeopardised, and any exchange rate pressures would be reflected in
inflation pressures as well, especially given that Armenia remains
reliant on imports for some basic consumer goods.
by: Venla Sipila
Global Insight
February 9, 2012
The Central Bank of Armenia (CBA) has in its February meeting
decided to keep its refinancing interest rate unchanged at 8%,
Reuters reports. The last rating revision was a cut in September, when
inflation eased within the CBA's target band. The decision follows the
latest inflation data from the National Statistical Service showing
that consumer prices in January increased by 4.8% year-on-year (y/y),
the annual inflation rate thus edging back to its November 2011 level,
following a rate of 4.7% y/y posted in December. Food prices started
the year up 6.0% y/y, while January saw non-food good prices rising
by 3.6% y/y and service tariffs gaining 3.5% y/y. In month-on-month
(m/m) comparison, prices in January increased by 3.6%. Annual inflation
last year averaged 7.7% (seeArmenia: 11 January 2012:).
Significance:The year started with the inflation rate clearly within
the target range set by the CBA at 4% with a variation band of 1.5
percentage points on either side. At present, we expect that inflation
will be contained within this range in the coming months and quarters.
Demand-side inflation pressures should remain fairly weak, and the
overall growth outlook subject to downward risks in the current
external environment. High commodity prices are still supporting
mining sector export revenues, but the uncertain outlook for
important remittance inflows, also implies inflation risks. Indeed,
in the case of a marked deterioration in current transfer flows,
financial stability in the still very dollarised economy might be
jeopardised, and any exchange rate pressures would be reflected in
inflation pressures as well, especially given that Armenia remains
reliant on imports for some basic consumer goods.