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CENTRAL BANK'S HIGHER REFINANCING RATE TO RAISE PRICE OF MONEY - ARMENIAN ECONOMISTS
11:15 * 11.02.15
The Central Bank of Armenia's (CBA) decision to raise its finance
interest rate by 1% is like to raise the price of money, says Hayk
Gevorgyan, a economic commentator for the Armenian daily Haykakan
Zhamanak.
"What the banks do now is they borrow money from the Central Bank
to sell it to clients as loan-takers. And the bank isn't able to
give that money at a low interest rate, as the rate at which it has
borrowed it was high," he told our correspondent.
Over the past month, the CBA has twice raised its inteerest rate by
1%, increasing the total refinancing level to 10.5% instead of the
former 8.5%.
It's an open secret that Armenia's population widely relies on consumer
loans to buy electronic equipment, and their interest rate, which is
24%, is thought to be considerably high.
Asked whether that loan too is expected to rise, the economist he
thinks that all depends on the general trends on the market. He said
an increase of up to 50% would be possible in case consumers turn
out to be ready ready to afford the sum.
But the consumer loans, according to him, have a very small share -
around $50-$60 billion - in the total crediting.
In a statement on Tuesday, the CBA reported 2.5% price surge
against the backdrop of a 4.3% annual inflation rate (recorded in
late-January).
"The macro-economic records do not imply that the Central Bank was
supposed to raise refinancing interest rate. It isn't easy to say at
the moment what the underlying factor is, but because the inflation
is within the norm, the economic activity is low too. Hence it would
have been logical of the Central Bank to pursue the contrary trend
to contribute to an economic growth at the expense of inflation,"
Gevorgyan said.
The expert said he feels that the bank made the decision in an attempt
to prevent a possible hike in prices.
Commenting on the CBA's move, Doctor of Mathematical Economics,
Professor Ashot Tavadyan said he thinks that the high interest rate
may restrain inflation only in the short-term perspective.
"But in case it is long-term, the impact may be negative, causing a
hike, especially in case of a high money shortage. The money volume
in our country is contingent on the GDP - below 40%," he noted.
Tavadyan said he doesn't think that a high refinancing rate is always
an efficient tool in terms of suppressing inflation or vice versa. He
also ruled out its direct impact on the inflation rate, especially
in countries like Armenia where the import volumes several times tops
the exports.
"If the international prices change, the higher refinancing interest
rate may have a produce a contrary effect," he warned.
http://www.tert.am/en/news/2015/02/11/kb/1586105
From: Baghdasarian
11:15 * 11.02.15
The Central Bank of Armenia's (CBA) decision to raise its finance
interest rate by 1% is like to raise the price of money, says Hayk
Gevorgyan, a economic commentator for the Armenian daily Haykakan
Zhamanak.
"What the banks do now is they borrow money from the Central Bank
to sell it to clients as loan-takers. And the bank isn't able to
give that money at a low interest rate, as the rate at which it has
borrowed it was high," he told our correspondent.
Over the past month, the CBA has twice raised its inteerest rate by
1%, increasing the total refinancing level to 10.5% instead of the
former 8.5%.
It's an open secret that Armenia's population widely relies on consumer
loans to buy electronic equipment, and their interest rate, which is
24%, is thought to be considerably high.
Asked whether that loan too is expected to rise, the economist he
thinks that all depends on the general trends on the market. He said
an increase of up to 50% would be possible in case consumers turn
out to be ready ready to afford the sum.
But the consumer loans, according to him, have a very small share -
around $50-$60 billion - in the total crediting.
In a statement on Tuesday, the CBA reported 2.5% price surge
against the backdrop of a 4.3% annual inflation rate (recorded in
late-January).
"The macro-economic records do not imply that the Central Bank was
supposed to raise refinancing interest rate. It isn't easy to say at
the moment what the underlying factor is, but because the inflation
is within the norm, the economic activity is low too. Hence it would
have been logical of the Central Bank to pursue the contrary trend
to contribute to an economic growth at the expense of inflation,"
Gevorgyan said.
The expert said he feels that the bank made the decision in an attempt
to prevent a possible hike in prices.
Commenting on the CBA's move, Doctor of Mathematical Economics,
Professor Ashot Tavadyan said he thinks that the high interest rate
may restrain inflation only in the short-term perspective.
"But in case it is long-term, the impact may be negative, causing a
hike, especially in case of a high money shortage. The money volume
in our country is contingent on the GDP - below 40%," he noted.
Tavadyan said he doesn't think that a high refinancing rate is always
an efficient tool in terms of suppressing inflation or vice versa. He
also ruled out its direct impact on the inflation rate, especially
in countries like Armenia where the import volumes several times tops
the exports.
"If the international prices change, the higher refinancing interest
rate may have a produce a contrary effect," he warned.
http://www.tert.am/en/news/2015/02/11/kb/1586105
From: Baghdasarian