The Central Bank of Armenia (CBA) increased its benchmark interest rate for the fourth time in as many months on Tuesday, citing mounting inflationary pressures on the country’s economy.
The CBA board decided to raise the re-financing rate by 25 basis points to 7 percent just days after its former chairman, Prime Minister Tigran Sarkisian, expressed concern about rising inflation in the country.
According to official statistics, Armenian consumer prices rose by more than 7 percent in the first five months of 2008, surpassing the government’s and the CBA’s full-year target of 4 percent. The consumer price index appears to have been primarily pushed up by the increased international prices of foodstuffs such as wheat, cooking oil and butter.
Speaking at a weekly cabinet meeting on Thursday, Sarkisian effectively admitted that Armenian companies enjoying a de facto monopoly on imports of those products are also responsible for the “very high” inflation rate in addition to global market trends. He said the international prices of wheat and rice have fallen significantly over the past four weeks and instructed government bodies to make sure that there are corresponding price adjustments in Armenia as well.
In a statement, the CBA board said that the decreased cost of some of the imported foodstuffs is being offset by soaring international oil prices. It also said that growing domestic consumer spending carries “additional inflationary risks.”
The CBA’s re-financing rate stood at 4.75 percent in spring 2007.