There Are No Significant Risks of Uncontrollable Inflation Acceleration: Central Bank

The Central Bank of Armenia assures that there are no grounds for speculative sentiments in the foreign exchange market. Moreover, under these circumstances, both at present and in the foreseeable future, there are no significant risks of uncontrollable inflation acceleration. This was stated by the Central Bank in response to a written inquiry from Armenpress, addressing the recent depreciation of the dram exchange rate in the country.

“Based on our observations, there have been no significant imbalances in the flows of the real sector underlying the movement of the dram (exports, imports, remittances, FDI, etc.). Therefore, there are also no grounds for speculative sentiments in the foreign exchange market. At the same time, while the country risk premium for Armenia slightly rose in the international financial markets in the early days of declaring the state of emergency, it has currently decreased again. This indicates that the currency risks of our economy in the international capital market are not currently assessed as high,” the Central Bank stated.

The Central Bank has noted that at the same time, the current trends in the exchange rate have been directly influenced by the uncertainty regarding future economic and political prospects in Armenia. The developments in the exchange rate, among many other factors, are continuously monitored by the Central Bank in terms of their impact on inflation. The Central Bank reminded that due to the consistent monetary policy pursued by the bank in recent years, we currently have a low and anchored inflation level (for example, the 12-month inflation rate in October was 1.3%).

“Under these circumstances, both at present and in the foreseeable future, there are no significant risks of uncontrollable inflation acceleration. Furthermore, the Central Bank of Armenia currently possesses a wide range of tools and will certainly respond with its entire set of primary tools in case such risks manifest, ensuring price and financial stability,” assured the Central Bank.

However, the Central Bank noted that due to the influence of various factors, including changes in specific energy carriers and other international prices, changes in the prices of certain goods may occur. The Central Bank emphasized that this does not necessarily pose risks to the overall price stability in the country. “It should also be noted that, as experience has shown over the years, fluctuations (including in the exchange rate) have been recorded under different economic and political developments. However, as a result of the Central Bank's consistent actions, a manageable and low level of prices and an efficient and stable financial system have always been maintained,” concluded the Central Bank.