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(Reuters) - Armenia's Central Bank cut its refinancing rate by 25 basis points to 5 percent on Tuesday, as stabilizing inflationary pressures enable it to focus on helping the country weather the global financial crisis.


“The Central Bank board has decided to cut the refinancing rate in line with financial market trends which will promote economic activity without threatening price stability,” the bank said in a statement.

The landlocked country of 3.2 million people is feeling the impact of recession in close economic ally Russia. Lower inflation has allowed Armenia to pursue a policy of monetary easing from April. Prior to that, the central bank floated the dram currency to secure a $540 million standby loan from the IMF in March, at the time raising the refinancing rate by 100 basis points to 7.75 percent.

The Central Bank says it sees annual inflation at 4 percent plus/minus 1.5 percentage points. In August, consumer prices rose 3.5 percent year-on-year, at the lower end of the regulator's forecast range.

Central Bank governor Artur Javadian told Reuters in July that Armenia's economy would likely contract 7-8 percent in 2009. The forecast was between the bank's previous estimate of a 5.8 percent contraction and the 9.5 percent slump forecast by the International Monetary Fund in late June.

GDP contracted 18.5 percent in January-July in comparison with 10.6 percent growth in the same period last year.
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