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Citing falling consumer price inflation, the Central Bank of Armenia (CBA) lowered the minimum cost of borrowing in the country on Tuesday for a second time in three months.

The CBA’s governing board set the benchmark refinancing rate 9.75 percent, down by 0.5 percentage points. In a statement, it argued that consumer prices fell last month, translating into an annual inflation rate of 1.9 percent.

The statement attributed this to a continuing fall in international commodity prices, the decreased cost of domestic agricultural output and “weak internal demand” presumably resulting from sluggish growth in non-agricultural sectors of Armenia’s economy.

“The Central Bank board reckons that inflation will remain at a low level in the months ahead,” it said, adding that more interest rate cuts are therefore possible.

The refinancing rate stood at 6.75 percent less than a year ago. The CBA raised it to 8.5 percent in December in response a sharp depreciation of the Armenian dram caused by falling remittances from Russia. As part of its efforts to shore up the national currency, the CBA also raised other lending rates as well as minimum reserve requirements for Armenian commercial banks.

Although the dram’s exchange rate remained stable in the following weeks, the refinancing rate reached 9.5 percent in January, with the CBA citing “high inflationary expectations.” It was raised further to 10.5 percent in February. The dram’s value against the U.S. dollar has barely changed this year, leading the Central Bank to cut the rate by 0.25 percentage points in August.

Late last week, a senior official from the International Monetary Fund urged the authorities in Yerevan to allow “greater exchange rate flexibility” and “limit interventions” in the local currency market. “Gradual normalization of monetary conditions through unwinding of the emergency measures introduced in 2014 would also help support a resumption of bank lending and growth,” Mitsuhiro Furusawa, the fund’s deputy managing director, was quoted by an IMF statement as saying.

The statement announced the disbursement of a fresh $16.3 million installment of a $114 million loan to Armenia approved by the IMF last year.

The CBA measures to support the dram forced private Armenian banks to substantially raise their interest rates and tighten requirements for businesses seeking credit.

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