YEREVAN, June 28. /ARKA/. Armenia's Central Bank said today it had decided to cut its refinancing rate to 7.5 percent from 7.75 percent. According to a Central bank press release, the annual deflation in the country was at 2.1 percent in May compared to 1.9 percent deflation in April.

The monthly deflation in May was 0.7 percent compared to 0.3 percent deflation in April.
The Central Bank said also it does not expect significant inflationary pressures from the external sector. Nonetheless, it continues to monitor developments in financial markets with the focus on ongoing processes in the European Union.

The Central Bank singled out the relatively high economic activity in Armenia in the first five months of the year accompanied by certain recovery of aggregate demand, at a rate higher than expected. This, it said, was due to the Central Bank’s  and government’s incentive policies,  reflected in the increase in trade and imports of goods and lending.

The Central Bank believes also that the low inflationary environment will continue in the coming months with relatively steady inflationary expectations. However, in the second half the deflation is expected to slow down significantly. This in mind the regulator considers it appropriate to reduce the refinancing rate to gradually neutralize the inflationary environment and bring the 12-month inflation rate  to the projected target band.

In the future, along with economic development, the Central Bank will adjust also the direction of monetary policy to ensure the implementation of the medium term inflation target.
This is the fourth cut of the key rate by the Central Bank this year. -0-