YEREVAN, March 13. /ARKA/. Against the backdrop of the latest deflationary quarter and weak single-digit inflation figures earlier, such rate cuts look very cautious, Freedom Broker Armenia CEO Hovak Hovakimyan told ARKA news agency when asked to comment on the Central Bank's decision to lower the refinancing rate.

On March 12, the Central Bank Board lowered the refinancing rate by 0.25 percentage points, setting it at 8.5%. It was the seventh consecutive rate cut since last June.

According to Hovakimyan, there are reasons to believe that in the absence of a developed centralized platform for currency trading and short interest rates, the Central Bank of Armenia is very limited in its regulatory and stability tools.

"We still believe that interest rates in the country are high and the exchange rate of the dram is expensive. With a lower exchange rate of dram, inflation may accelerate due to the high share of imports, nevertheless, the growth rate of imports may decrease, while exports, on the contrary, may increase," Hovakimyan noted.  

In this regard, he pointed out that in fact the current high exchange rate of the dram stimulates the growth of imports and restricts exporters, which is a classic example of the "Dutch disease".  

"Certain concerns of the Central Bank may arise in connection with a possible change in the foreign policy and economic vectors of the government. This may cause turbulence both in the economy and in the exchange rate dynamics," said the head of Freedom Broker Armenia.

The state budget for 2024 envisages inflation at the level of 4% (±1.5%). According to the National Statistical Committee, deflation of 1.7% was recorded in Armenia's consumer market in February this year compared to February last year, while prices decreased by 0.7% compared to January. -0-