YEREVAN, May 13. / ARKA /. Armenia's Central Bank said today it has cut its key refinancing rate to 7.25 percent from 7.50 percent after data showed annual inflation within the government's 2014 target.
It said the annual inflation was 4.4 percent in April, up from 3.8 percent recorded in March. The indicator was within the government's target range of between 2.5 percent and 5.5 percent for 2014. Monthly inflation in April was 0.5 percent, compared to deflation of 0.4 percent in March.
The regulator said the 12-month inflation will decline in the coming months, especially in the third quarter when it is expected to drop to the lowest target range due to the elimination of the impact of higher energy tariffs that came into force in July 2013.
The Central Bank said also that because of geopolitical developments the uncertainty in the external sector still persists.
“The weak growth trend has continued throughout this year- mainly due to slow recovery of the construction sector and current developments in the industrial sector. Although the policy of easing of monetary conditions and the expanding fiscal policy that began in the second quarter will trigger the aggregate demand and resume inflation, it will not be enough to neutralize the rise of inflation rate above the projected 12-month target,’ the Central Bank said.
"Under these circumstances the Central Bank considers it appropriate to cut the refinancing rate to create conditions for medium term economic growth and achieving the target inflation rate", it said.
The regulator said also that depending on internal and external economic developments, it may revise the directions of its monetary policy in order to ensure achieving the projected inflation target.
The Central Bank kept its refinancing rate unchanged at 7.50 percent in March. The government expects the inflation this year to be within 4% (± 1.5%) range. Its GDP projection is 5.2%. -0 -