Central Bank expects continuation of rate cuts in Armenia in the first half of 2025

YEREVAN, 13 January. /ARKA/. In the first half of 2025, a string of rates in Armenia are expected to be cut amid the current refinancing rate of 7%, Deputy Chairman of the Central Bank Hovhannes Khachatryan said.

‘First it will affect state securities, then deposits, loans and all other rates,’ he said at a session of the parliamentary committee on financial-credit and budgetary issues on Monday.

Armenia has been in a cycle of refinancing rate cuts since June 2023: the Central Bank has lowered the rate 13 times in a row from 10.5 per cent to the current 7 per cent.

‘We have had a cycle of significant easing of monetary conditions. Interbank rates have fallen and we are not very far from the neutral rate,’ Khachatryan said.

The Central Bank deputy chairman pointed to the existence of a lag effect in the context of rates on government securities, as well as on loans and deposits.

‘We have seen this: when we raised the rate by 6%, the impact on government securities and loans was cushioned and lagged. Now (it is) happening the same way,’ he said.

In this regard, Khachatryan noted that the rapid reduction in rates is not helped by the existing apparent demand for loans. He said loans to residents grew by 24 per cent, loans to individuals by 26 per cent, where the largest share is for mortgages (up 36 per cent), while loans to legal entities grew by 20 per cent.

‘Against the backdrop of high demand for lending, rates tend to decline slowly,’ he added.

According to the Central Bank of Armenia, the loans issued by the banks in November 2024 totalled AMD 6.15 trillion compared to about AMD 6 trillion in October of the same year. At the same time, the deposits of residents totalled AMD 5.96 billion in November against AMD 5.79 billion in October, and that of non-residents - AMD 193.5 billion against AMD 212.9 billion in October. ($1 - AMD 397.22). -0-