At its sitting January 11, the Board of the Central Bank of Armenia (CBA) decided to leave the annual refinancing rate unchanged.

A 1.8% price rise last December against the previous month caused a 9.4% annual price rise. The refinancing rate is believed to be one of the most important instruments for price administration, but its efficiency has not been proved.

The CBA Board accounts for the high annual price rise by the rise in food prices in international markets and rise in the prices for agricultural produce. The share of the rise in prices for agricultural produce in the annual price rise was 7.5%, with the share of prices for fruit and vegetables, eggs, meat and dairy products being 5% and that of prices for imported food 2%.

The pressure from international commodity markets is growing thus causing further price rise. The CBA Board does not believe such a decline in agriculture and resultant pressure highly risky. The CBA Board believe that the slowly recovering aggregate demand does not cause pressure sufficient to cause a price rise. However, with the aforementioned tendencies continuing, the prices may even exceed the highest target.

Considering the lags in the effect monetary policy has on aggregate demand, as well as supply, secondary effects and uncertain situation in the agricultural sector, the CBA Board considers tougher credit terms possible.