Central Bank of Armenia raises its key rate to 7%, a second straight hike to fight inflation
- Published
- Place
- Yerevan, Armenia
- Event date
- Past event —
Summary
The Central Bank of Armenia raised its key interest rate by 0.25 points to 7% on 3 November. It is the second hike in a row, after the one on 15 September (to 6.75%), the first since December 2022. The Lombard repo rate rises to 8.5% and the deposit facility rate to 5.5%. Six of the eight board members voted for the increase, while two wanted to keep the rate unchanged. Inflation remains above the 3% target: 4.5% year on year in August and 4.3% in September. Governor Martin Galstyan cited strong domestic demand, wage increases in some sectors, longer stays by Russian citizens and rising global energy and food prices. He estimated that a 10% rise in the price of Russian gas would add up to 0.8 points to inflation.
Analysis
For households and businesses, the message is clear: borrowing will not get cheaper any time soon. Banks usually pass such increases on to dram loans, including mortgages. The Central Bank says it prefers to act early rather than let inflation settle above its target. Uncertainty over relations with Russia, and therefore over the gas price, now weighs heavily enough for the governor to put a number on it in public.
Possible consequences
Variable-rate borrowers and people seeking dram loans should expect slightly more expensive terms in the coming months.
