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The Central Bank of Armenia (CBA) cut its key interest rate on Tuesday for the seventh time this year, citing continuing consumer price deflation and slowing economic growth in the country.

The CBA’s governing board cut the refinancing rate by 0.25 percentage points to 6.5 percent, the lowest level in more than two years.

In a statement, the bank argued that the national consumer price index was down by almost 1 percent year on year in October and that “the pace of economic activity is continuing to slow down.”

The statement said that sluggish global growth and the Armenian government’s plans to cut public spending next year are also contributing to the “deflationary environment” which the CBA believes is bad for the domestic economy. “In these circumstances, a certain easing of monetary conditions is still expedient,” it added.

The refinancing rate stood at 6.75 percent when the Armenian dram began weakening against the U.S. dollar in October 2014 amid falling cash remittances from Armenian migrant workers in Russia. The CBA raised it to 10.5 percent and tightened minimum reserve requirements for commercial banks, stabilizing the national currency’s exchange rate by the beginning of 2015. The CBA began gradually easing its monetary policy a year ago.

Its previous, more drastic rate cut was announced in late September, two weeks after Karen Karapetian was appointed as Armenia’s new prime minister. Karapetian met with CBA Governor Artur Javadian and top executives of Armenian commercial banks the same day to discuss ways of stimulating economic activity in the country. He reportedly urged the bankers to propose “unconventional solutions” that would facilitate greater lending to businesses and small and medium-sized enterprises in particular.

A government statement quoted Karapetian as saying late last week that his cabinet will soon help to set up special funds that will “support proactive businesses and motivate law-abiding taxpayers.” It did not elaborate.

The Armenian economy is projected to grow by between 2 and 3 percent this year. The government expects growth to accelerate to 3.2 percent next year.

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