Annual Inflation Rises to 9.0%: Central Bank of Armenia

As of May 2022, annual inflation has increased to 9.0%. The normal annual inflation rate has also risen, reaching 8.4%, according to the Central Bank of Armenia.

The ongoing Russia-Ukraine conflict continues to negatively impact the economic and financial market developments in Armenia's main partner countries. Persisting disruptions in global supply chains and the ongoing rise in prices in international commodity markets are contributing to an expansion of the global inflationary environment. Central banks in developed countries are signaling a relatively faster tightening of monetary policy. Thus, the inflationary impact on the Armenian economy from external factors remains.

High economic activity in Armenia is projected to persist in the second quarter of 2022. A significant influx of international visitors and an increase in domestic private spending are contributing to growth in the service sector and overall demand. This leads to an expansion of the overall inflationary environment and an increase in inflation expectations.

A substantial increase in the export of services from Armenia and financial inflows are also contributing to the appreciation of the dram in the exchange market. It is anticipated that this will have a positive effect on the easing of the domestic inflationary environment in the near future.

In light of the current situation, the Council finds it appropriate to leave the policy interest rate unchanged. The Central Bank Council will remain committed to taking adequate actions to ensure inflation stabilization and mitigate any risk of inflation expectations becoming unanchored. It is expected that annual inflation will gradually decrease and approach the targeted rate of 4% in the medium term.

The Central Bank Council assesses that high uncertainty regarding the macroeconomic outlook related to geopolitical developments still persists. At the same time, the risks of deviation from the projected path of inflation are generally balanced. In the event of any manifestation of risks in either direction, the Council will respond adequately to maintain the goal of price stability.

Detailed information on the factors underlying the interest rate decision can be found in the Inflation Report to be published by June 28, 2022, as part of the Monetary Policy Program for the second quarter of 2022.