What Does the Central Bank President Link to Inflation in the Armenian Market?

After a certain stabilization of food prices in the global market in March, inflation is again being observed due to optimistic expectations for economic growth. As an importing country, Armenia cannot remain uninvolved in this trend. This was stated by the President of the Central Bank, Martin Galstyan, during a press conference addressing the issue of rising prices for several food products in Armenia.

“We have about an 80 percent increase in the prices of oils and fats in the global market and a 40 percent rise in the prices of sugar. As a small importing country, we cannot ignore these prices. In other words, we do not have domestic production aimed exclusively at meeting the needs of domestic consumers by domestic producers. Therefore, as an importing country, we import inflation. And when we talk about inflation caused by supply factors, this is what we primarily mean,” said Galstyan, adding that there is also some volatility in exchange rates.

Galstyan noted that a certain stabilization of prices had entered the global market in March. “However, now we are again observing price increases in the global market, primarily due to optimistic expectations for economic growth in European countries and the USA. After overcoming the coronavirus, people and experts expect that economies will grow faster, and a certain demand will be formed, which will raise prices,” said the Central Bank President.

He assured that the Central Bank's policy aims to demonstrate balanced approaches, conveying key messages to consumers that there may be a certain rise in prices in the short term, but the Central Bank will use all its tools to bring inflation to the targeted level. “We are also trying to balance. We can curb inflation, but in doing so, we must ensure that we do not face an economic downturn from which we cannot recover. Thus, through this balancing, we are trying to reach a level that will satisfy both us and the society in the medium term,” Galstyan assured.

He mentioned that by raising the refinancing rate, they reassure people that the Central Bank is in control and will manage inflation in the country. “Even if we finish this year with higher inflation than our target, we will certainly return to our target in the coming years as a result of the policies pursued. We will fulfill our promise to our society,” assured the Central Bank President.

The Central Bank Council continues to expect inflationary effects on the Armenian economy from the external sector. According to the Council’s assessment, certain inflationary pressures are also emerging from the domestic economy. However, the Central Bank is confident that after a certain acceleration in the short term, the 12-month inflation will gradually decline and stabilize around the targeted 4% indicator in the forecast horizon.