YEREVAN, June 24. / ARKA /. The Central Bank of Armenia has lowered its key refinancing rate today by 0.25 percentage points to 7%. The regulator reported a deflation of 0.8% in May versus unchanged prices in 2013 May. Under these conditions, the 12-month inflation at the end of May was 3.6%.

The Central Bank said the inflationary environment will continue to weaken in the next months due to the elimination of the impact of higher energy tariffs that came into force in July 2013. It said in the third quarter the inflation will be below the lower level of the projected band.

The Central Bank said it believes that the economic growth in the first half of 2014 is within the projection, while the relative passivity of the industrial sector and the slow pace of recovery of the construction sector have been compensated by higher-than-expected growth in agriculture and the service sector.

The expansion of the fiscal policy, scheduled for the second half of 2014 and the ongoing easing of monetary conditions will lead in the short term to an expansion of aggregate demand and the recovery of inflation rate. As a result, in the 4th quarter the 12-month inflation will go up to the lower limit of the allowable fluctuation range.

"In this situation, the Central Bank considers it expedient to continue easing of monetary conditions by lowering the refinancing rate," it said.

The regulator said it will be responding to new external and internal economic developments by adjusting its monetary and credit policy to secure the achievement of the medium-term inflation target.

The last time the Armenian Central Bank revised its refinancing rate was on May 13, by lowering it by 0.25 percentage points to 7.25%. -0-