Central bank cuts benchmark rate to 7.75 percent

17.05.2016 20:57
Central bank cuts benchmark rate to 7.75 percent

YEREVAN, May 17. /ARKA/. Armenia's Central Bank Board has cut today the key refinancing rate by 0.5 percentage points, setting it at 7.75%.

According to a Central Bank press release, a 0.3% deflation was recorded in 2016 April, down from a deflation of 0.4% reported in April last year. Under these conditions, the 12-month inflation at the end of April was minus 1.9%.

'The world economic growth is still slow, however, deflationary trends in international commodity markets have been replaced by relative stability. Nevertheless,  the Central Bank Board believes that in the coming months the external deflationary impact on domestic prices will continue until  to  neutralize in the second half of the year,' the regulator said.

The Central Bank Board has also recorded a significant growth in economic activity in the first quarter of the year, as opposed to the first quarter of 2015, which it said is mainly due to more positive than expected developments in industry and services. Positive trends were also recorded in domestic demand resulting from the Central Bank's stimulating policies.

During this period the exports expanded recording  high growth rates. Based on these developments, the Central Bank has revised its economic growth expectations upwards.

At the same time, the Central Bank believes that inflationary expectations have decreased thanks to the regulator's consistent monetary policy. These expectations have been buoyed  by expected  drop in natural gas price prompting the Central bank Board  to ease monetary conditions by a  larger scale.

As a result of this policy the inflationary environment will gradually expand since the second half of 2016 to return to the projected target band by the end of the year.

In the absence of expected economic developments, as well as other external and internal risks, the Central Bank Board  will  continue the easing of monetary conditions, the regulator said. -0-


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