The CBA’s governing board set the refinancing rate at 6 percent, up by 0.5 percentage points.
The board already raised it by 1 percentage point on December 15 and by another 0.25 percentage points on February 2 amid rising consumer prices in the country. A major depreciation of the Armenian currency, the dram, was another factor behind the tightening of its monetary policy.
In a statement, CBA said the latest rate hike is also aimed at curbing higher-than-expected consumer price inflation.
According to Armenia’s Statistical Committee, 12-month inflation reached 5.8 percent in March, surpassing a full-year target of 4 percent set by the Armenian government and the CBA for 2021.
Food prices were up by an average of 7.4 percent year-on-year. Statistical Committee data shows particularly drastic increases in the cost of imported basic foodstuffs such as cooking oil and sugar.
The CBA governor, Martin Galstian, said the surge reflecting a global trend, coupled with the weaker dram, is the main cause of the higher inflation rate. He admitted that the authorities may well fail to meet their 2021 inflation target.
Speaking at a news conference, Galstian was confident that the CBA’s latest decision to raise the minimum cost of borrowing will not slow Armenia’s recovery from a recession caused by the coronavirus pandemic and aggravated by the war with Azerbaijan.
In fact, he said, the Armenian economy now seems on course to growth faster than was recently projected by the Central Bank. But he declined to forecast any growth rates.
The economy shrunk by 7.6 percent last year. The CBA forecast in March that it will expand by 1.4 percent in 2021.