YEREVAN, September 16. / ARKA /. The Central Bank of Armenia’s Board said today the inflation rate is set to decline and is likely to drop to the projected level of 4% (± 1,5%) before the end of the year.

The Central Bank said in a statement the contraction is expected to result from toughened monetary and credit policies assumed from the beginning of the year, the restrictive nature of fiscal policy, slow recovery of private spending, as well as from increasing agricultural production.

The Central Bank Board said also latest inflation developments are in tune with the monetary policy of 2011.

"By late September the 12-month inflation rate may reach or exceed the upper limit of the allowable fluctuations due to the sharp rise in price of sugar. However, the Central Bank is not worried, because the 12-month inflation will decline in the coming months rapidly," the statement said.

The Board also looked into the latest developments in the financial market when average interest rate on government bonds with maturities up to one year declined by 0.9 percentage points to 7.79%, the interest rate on repo dropped by 1.03 percentage points to 9.54%, while the interest rates on interbank repo fell by 0.79 percentage points to 9.17%.

On September 6 the Central Bank of Armenia lowered the refinancing rate by 0.5 percentage points to 8%, the interest rate on deposits of commercial banks by 0.5 percentage points to 5%. The last time the Central Bank raised the refinancing rate by 0.25 percentage points was on 13th April 2011 bringing it to 8.5%. -0-