Central Bank’s next year priority will be to eliminate inflationary potential: Chairman
22.11.2010,
19:38
In an exclusive interview with ARKA news agency, Central Bank Chairman, Arthur Javadian, said the Bank has been taking preemptive measures to fend off the banking system from being hit by a possible new global crisis.
YEREVAN, November 22, /ARKA/. In an exclusive interview with ARKA news agency, Central Bank Chairman, Arthur Javadian, said the Bank has been taking preemptive measures to fend off the banking system from being hit by a possible new global crisis. He said still before the 2007 -2008 crisis and especially after the post-crisis period the Central Bank had and has been working to improve its capacities for effective and operative reaction in case of a repeated crisis through upgrading its financial control capacities.
‘We are assessing the stability of the financial system and separate financial companies by means of stress-tests on a regular basis, their ability to withstand stress situations and their flexibility. We have also designed operative reaction programs of prompt measures for certain situations and certain scenarios to resolve solvency problems. From financial supervision perspective we are paying special attention to current monitoring and detailed analysis of financial organizations’ risks,’ he said.
Asked what kind of instruments the Bank was going to implement to regulate possible surge of inflation in the context of prime minister Tigran Sarkisian’s warning that inflation is going to be a main challenge in 2011, Mr. Javadian said the Central Bank’s priority for 20011 will be to eliminate the maintaining inflationary potential and curb inflationary expectations.
‘The Central Bank will use all available instruments to achieve n this objective with the active support of the government. Under the Law on Central Bank of Armenia, its major goal is to secure stable prices and the Central Bank is ready to ensure the projected inflation target. However, surge of inflation happens sometimes and the instruments the Central Bank possesses are not enough to ease it, for example an inflation triggered by demand factors,’ he said.
According to him, the inflationary environment of this year has been shaped by last year’s activation of domestic and foreign economies as well as by expansionary money and credit and fiscal policies, aimed at stimulating economic growth in 2009. The environment was also affected by inflationary factor that was seen in the third quarter of 2010 due to drastic decline in agricultural GDP and the growing price of wheat at global markets. As a result at the end of September the inflation rose by 8.6% form a year before as prices of fruits, vegetables and potato grew by 3.3 p.p while prices of bakery products rose by 1.5 p.p. At the same time the inflation was eased to a certain degree by toughening money and credit terms through raising the refinancing rate.-0-
‘We are assessing the stability of the financial system and separate financial companies by means of stress-tests on a regular basis, their ability to withstand stress situations and their flexibility. We have also designed operative reaction programs of prompt measures for certain situations and certain scenarios to resolve solvency problems. From financial supervision perspective we are paying special attention to current monitoring and detailed analysis of financial organizations’ risks,’ he said.
Asked what kind of instruments the Bank was going to implement to regulate possible surge of inflation in the context of prime minister Tigran Sarkisian’s warning that inflation is going to be a main challenge in 2011, Mr. Javadian said the Central Bank’s priority for 20011 will be to eliminate the maintaining inflationary potential and curb inflationary expectations.
‘The Central Bank will use all available instruments to achieve n this objective with the active support of the government. Under the Law on Central Bank of Armenia, its major goal is to secure stable prices and the Central Bank is ready to ensure the projected inflation target. However, surge of inflation happens sometimes and the instruments the Central Bank possesses are not enough to ease it, for example an inflation triggered by demand factors,’ he said.
According to him, the inflationary environment of this year has been shaped by last year’s activation of domestic and foreign economies as well as by expansionary money and credit and fiscal policies, aimed at stimulating economic growth in 2009. The environment was also affected by inflationary factor that was seen in the third quarter of 2010 due to drastic decline in agricultural GDP and the growing price of wheat at global markets. As a result at the end of September the inflation rose by 8.6% form a year before as prices of fruits, vegetables and potato grew by 3.3 p.p while prices of bakery products rose by 1.5 p.p. At the same time the inflation was eased to a certain degree by toughening money and credit terms through raising the refinancing rate.-0-
