The Central Bank of Armenia raised its policy rate by 0.25 percentage points to 7%, emphasizing upside inflation risks in its executive monetary policy statement. Annual inflation stood at 4.3% in September, above the 3% target, while core inflation was 4.7%. Economic activity slowed in the third quarter but remained above its sustainable level, with construction and services continuing to drive growth. Strong retail trade and imports of final consumption goods pointed to excess demand. Increased visits to Armenia and longer stays added risks of higher wages and services inflation. Core inflation pressures also broadened across product groups, while rising housing rents contributed to inflation in services with sticky prices. Persistent regional conflicts, elevated energy prices and accelerating global food inflation increased the risk of further price pressures. Rising global neutral interest rates could also require a higher domestic policy rate path. The board weighed these risks against scenarios involving slower global growth, weaker consumer and investment confidence linked to restrictions on exports to Russia, and a sustained decline in Armenia’s country risk premium. Those scenarios would imply a lower rate path relative to market expectations, but the decision placed greater emphasis on managing the upside risks.
Central Bank of Armenia raises policy rate by 0.25 percentage points to 7%
The Central Bank of Armenia increased its policy rate by 0.25 percentage points to 7% as September inflation of 4.3% remained above its 3% target, with core inflation at 4.7%. The decision gave greater weight to strong domestic demand and inflation pressures associated with regional conflicts than to downside risks from slower global growth and restrictions on exports to Russia.