The CBA’s governing board set the refinancing rate at 7.75 percent, up by 0.5 percentage points.
The minimum cost of borrowing stood at 4.25 percent when the bank began tightening its monetary policy in December 2020 after a major weakening of the Armenian currency, the dram, followed by rising consumer prices.
In a statement, the CBA blamed the latest increase on a “substantial increase in inflationary pressures” on the Armenian economy emanating from the outside world.
The statement said annual consumer price inflation in the country accelerated from 9.1 percent in October to 9.6 percent in November, the highest rate in many years. It is well above a 4 percent target set by the Armenian authorities for 2021.
The higher-than-projected inflation was primarily driven by sharp rises in the prices of key foodstuffs. Armenia imports some of them.
The CBA said that international food and commodity prices keep rising. “In these circumstances, inflationary pressures on Armenia’s economy coming from the external sector are expected to increase,” it warned.
After concluding a three-week visit to Yerevan on November 12, a senior official from the International Monetary Fund stressed the importance of “reducing inflation towards the Central Bank’s target of 4 percent.”
The bank also reported on Tuesday a slowdown in economic activity in the country, raising more questions about the Armenian government’s GDP growth projections.
Prime Minister Nikol Pashinian said in July that the domestic economy is on course to grow by 6 percent this year after contracting by 7.4 percent in 2020. The IMF and the World Bank forecast more modest growth rates this fall.
The government’s Statistical Committee registered a GDP growth rate of just 2.7 percent in the third quarter of 2021.