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CBA Raises Refinancing Interest Rate To 4.5%

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  • CBA Raises Refinancing Interest Rate To 4.5%

    CBA RAISES REFINANCING INTEREST RATE TO 4.5%

    Noyan Tapan
    Aug 30 2006

    YEREVAN, AUGUST 30, NOYAN TAPAN. At the August 29 sitting, the Central
    Bank of Armenia (CBA) Board raised the repo interest rate by 0.25%
    to 4.5%. This was the third step of such kind this year - in January,
    the refinancing interest rate was raised from 3.5% to 4%, in late
    July - to 4.25%. The CBA explains its decision by the necessity to
    curb the possible high rates of inflation.

    According to the CBA press service, the CBA Board takes a view that
    registration of a two-digit economic growth is quite realistic this
    year, but the previously indicated inflation risks have appeared
    and will most probably continue. Among external environment risks,
    the most notable one is an expected growth in international prices of
    raw materials, oil and metals. Among domestic risks, the CBA pointed
    out the decline in the agricultural sector, as a result of which the
    seasonal fall in the prices of fruit and vegetables was less than
    expected. At the same time, according to the same source, since 2006,
    the continuous income growth has already had its effect on inflation
    in such sectors as services and non-food commodities, which, by the
    CBA's estimates, will continue in the near future. The CBA Board
    also attaches importance to the fact that considerable budgetary
    expenditures envisaged in late 2006 will be conducive to inflation,
    which will become evident in the first half of 2007.

    According to the CBA, due to the above mentioned factors, inflation
    within the next 12 months will exceed the maximum annual target index
    of 3%. For that reason, the CBA does not rule out that it will againt
    change interest rates in the coming months.
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