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ARMENIAN INTEREST RATES STABLE IN APRIL AS INFLATION CONTINUES TO EASE
by Venla Sipila
Global Insight
May 9, 2012
The Central Bank of Armenia (CBA) decided to leave its refinancing
rate unchanged at 8.0% in its April monetary policy meeting, Reuters
reports. The policy rate has now remained stable since September 2011.
The decision follows further moderation in inflation pressures.
Indeed, data from the Armenian National Statistical Service showed
that consumer prices grew by just 1.9% year-on-year (y/y) in April,
following a gain of 2.2% y/y in March and 3.0% y/y in February.
In marked contrast to last year, annual food-price growth in April
remained below the gains in other categories: food prices climbed by
1.1% y/y while prices of non-food goods rose by 4.3% y/y and service
tariffs increased by 1.5% y/y. Thus, after food-price inflation had
already in the past two months remained below growth of non-food
prices, in April it was also exceeded by service-price growth.
Month-on-month (m/m) comparison reveals deflation of 0.6%, caused by
m/m easing in food prices. Armenian consumer prices have increased by
2.1% since the beginning of the year, and by 3.0% y/y in JanuaryApril.
Inflation for the whole of 2011 averaged 7.7% (seeArmenia: 11 January
2012:).
Significance:Armenian inflation has now retreated further below
the lower limit of the CBA's target range. The central bank seeks
to keep inflation at 4.0%, with a variation range of 1.5 percentage
points on either side. The clear easing of inflation pressures draws
from a weaker push from food prices. These still play a very large
role in the Armenian consumption basket, so changes have a marked
impact on overall consumer-price inflation. Moreover, as seen in m/m
developments, the impact from lower food prices goes beyond annual
inflation, which is also impacted by base effects from last year.
Inflation outlook at the moment remains fairly benign, taking into
account the reasonably muted demand pressures. Risks naturally arise
from agricultural developments, as a weak harvest would push up food
prices again. On the other hand, inflation will be tempered due to the
very favourable deal reached with Russia over this year's gas import
prices, with no increases seen in 2012. Thus, inflation is likely
to remain well within target in the coming months. Consequently,
interest-rate cuts may follow in the near term.
by Venla Sipila
Global Insight
May 9, 2012
The Central Bank of Armenia (CBA) decided to leave its refinancing
rate unchanged at 8.0% in its April monetary policy meeting, Reuters
reports. The policy rate has now remained stable since September 2011.
The decision follows further moderation in inflation pressures.
Indeed, data from the Armenian National Statistical Service showed
that consumer prices grew by just 1.9% year-on-year (y/y) in April,
following a gain of 2.2% y/y in March and 3.0% y/y in February.
In marked contrast to last year, annual food-price growth in April
remained below the gains in other categories: food prices climbed by
1.1% y/y while prices of non-food goods rose by 4.3% y/y and service
tariffs increased by 1.5% y/y. Thus, after food-price inflation had
already in the past two months remained below growth of non-food
prices, in April it was also exceeded by service-price growth.
Month-on-month (m/m) comparison reveals deflation of 0.6%, caused by
m/m easing in food prices. Armenian consumer prices have increased by
2.1% since the beginning of the year, and by 3.0% y/y in JanuaryApril.
Inflation for the whole of 2011 averaged 7.7% (seeArmenia: 11 January
2012:).
Significance:Armenian inflation has now retreated further below
the lower limit of the CBA's target range. The central bank seeks
to keep inflation at 4.0%, with a variation range of 1.5 percentage
points on either side. The clear easing of inflation pressures draws
from a weaker push from food prices. These still play a very large
role in the Armenian consumption basket, so changes have a marked
impact on overall consumer-price inflation. Moreover, as seen in m/m
developments, the impact from lower food prices goes beyond annual
inflation, which is also impacted by base effects from last year.
Inflation outlook at the moment remains fairly benign, taking into
account the reasonably muted demand pressures. Risks naturally arise
from agricultural developments, as a weak harvest would push up food
prices again. On the other hand, inflation will be tempered due to the
very favourable deal reached with Russia over this year's gas import
prices, with no increases seen in 2012. Thus, inflation is likely
to remain well within target in the coming months. Consequently,
interest-rate cuts may follow in the near term.