At September 13, 2022 meeting, the CBA Board decided to raise the policy rate by 0.5 percentage points setting it at 10%.
In August 2022, 12-month inflation decreased to 9.1% at the end of the month. 12-month core inflation continued to grow reaching 10.2%.
In the third quarter of 2022, low economic growth and high inflation continued to sustain in the main partner countries of Armenia. The central banks of advanced countries will continue to conduct contractionary monetary policy. This will be reflected in the tightening of global financial conditions and in slowing of economic activity. Subsequently, a certain drop of prices will be observed in the international commodity markets, contributing to the gradual easing of the global inflationary environment. Hence, it is expected that inflationary effects from the external sector will subdue.
During the third quarter of 2022, high economic activity continued to be observed in Armenia. It mostly is witnessed in services and construction sectors. Positive developments continue in the export sector as well. High economic growth is predominantly driven by the demand factors. Again, its main contributors are the significant influx of international visitors and remittances. High demand contributes to the expansion of the inflationary environment and persisting high inflationary expectations.
In the current situation, the Board finds it appropriate to raise the policy rate. Relatively contractionary monetary policy and dram appreciation will gradually contribute to curbing demand and reducing inflationary expectations. The CBA Board is consistent in taking adequate actions to stabilize inflation and to offset any risk of deanchoring of inflation expectations and. In line with the outlined monetary policy scenario, the 12-month inflation will gradually decline and from the end of 2023, will stabilize around the 4% target.
The CBA Board considers that the risks of inflation deviation from the projected trajectory are mainly balanced. Should the risks materialize in any direction, the Board stands ready to respond accordingly in fulfilment of the price stability objective.
