OREANDA-NEWS. September 18, 2008. Meeting the Board of CBA raised the Refinancing Rate of CBA by 0.25 pp. to 7.75 percent, reported the press-centre of CBA.

Although a 0.7 percent deflation was recorded in August 2008 against past July, the 12-month inflation raised by 0.8 pp. amounting to 11.5 percent. This is determined mainly by the recent events taking place in the Region and, under this circumstance, an unchanging behavior of the commodity group ‘Bread products’ – instead of an expected decline.

The Board admitted that though external inflationary pressures continued easing in August, these trends however have not had substantial effects on the Armenia’s domestic market. The latter is attributable to both the obstacles associated with import of goods into Armenia as a result of the recent events in the Region and slow response of domestic prices due to imperfections in certain commodity markets.

All in all, if the import-associated obstacles prove to be non-persistent, the growth of domestic demand will not create additional inflationary pressures. Otherwise, the economy will face substantial risks of both increasing inflation and slowing pace of economic growth in the long-run.   

As the Board still underlines the importance of easing the inflation expectations and reducing deviation from the target as well as takes the account of uncertainties of the nature and persistence of the events taking place in the Region, it remains to believe that further adjustment of the Refinancing Rate will mostly depend on the situation in the Region in the months ahead and on how fast and adequately will the domestic prices response to the commodity price trends in the world markets.