Central Bank of Armenia Maintains Key Rates Amid Stable Inflation and Economic Growth
Overview of the Decision
On September 16, 2025, the Board of the Central Bank of Armenia (CBA) convened to review the monetary policy framework and decided to maintain the refinancing rate at 6.75%. This decision keeps the Lombard Repo Facility Rate at 8.25% and the Deposit Facility Rate at 5.25%. The move underscores the bank’s commitment to price stability while navigating a landscape of moderate inflation and robust economic activity.
Inflation Trends
In the third quarter of 2025, Armenia’s 12-month inflation rate saw a slight acceleration, reaching 3.6% in August. Core inflation, which excludes volatile items, also rose to 3.7%. These figures indicate a stable inflationary environment, with contributions from various commodity groups. Non-food products, services, non-seasonal food items, and seasonal food products have all played roles in shaping the overall inflation trajectory from 2020 to 2025, as illustrated in the bank’s charts.
The CBA attributes this stability to balanced demand and supply dynamics, though global factors continue to influence domestic prices.
Global and Regional Economic Context
The decision is set against a backdrop of heightened uncertainties in the global economy, particularly in Armenia’s key partner countries. In the United States, risks of slowing demand growth and accelerating inflation have increased, compounded by uncertainties in trade and fiscal policies. The U.S. federal budget deficit projections, as a percentage of GDP, show potential rises under various scenarios, including extensions of current laws, which could elevate long-term interest rates.
Inflation in partner economies like the U.S., Eurozone, and Russia varies, with U.S. headline inflation at 2.9%, Eurozone at 2.1%, and Russia at 8.1% year-over-year. Geopolitical tensions and disruptions in supply chains pose ongoing risks to global inflation, potentially affecting Armenia through trade channels.
Market expectations suggest that major central banks, including the Federal Reserve, will maintain or gradually ease tight monetary conditions. The Fed’s dot plot and market forecasts indicate a potential path for rate cuts, but uncertainties persist.
Domestic Economic Performance
Armenia’s economy demonstrated resilience in Q3 2025, with economic activity increasing by 10.4% year-over-year. Key sectors showed varied growth: industry contracted by 5.9%, while construction surged by 22.2%, trade grew by 0.9%, and services expanded by 10.9%. Monthly breakdowns for May, June, and July highlight continued momentum, particularly in construction and services.
Tourism has been a bright spot, with visitor numbers rising steadily from 2022 to 2025, supporting external demand for services. After a slowdown in 2024 and Q1 2025, Q2 and Q3 saw renewed growth in tourist arrivals.
Private sector nominal wages have grown, aligning with stabilizing core service prices and inflation expectations. Surveys from Q2 2025 indicate a mix of high, uncertain, and low inflation expectations among respondents, trending toward stability.
Risks and Policy Scenarios
The CBA considered multiple risk scenarios in its deliberations:
- Type A Scenarios: These include potential increases in neutral interest rates due to fiscal policies, both globally and domestically, and risks of excess demand formation in the economy.
- Type B Scenarios: These encompass weakening demand amid gradual real estate price corrections and uncertainties in global economic slowdown prospects.
Emphasizing the management of impacts from Type A scenarios, the board opted to keep the refinancing rate unchanged. The CBA remains vigilant, ready to adjust policies to ensure medium-term inflation targets of 3% and overall price stability.
Financial Market Indicators
An appendix on country risk premiums shows fluctuations in Armenia’s Eurobond yields and risk spreads from 2021 to mid-2025, reflecting evolving investor perceptions amid global events.
Implications and Outlook
This steady policy stance signals confidence in Armenia’s economic trajectory, balancing inflation control with growth support. Analysts anticipate that future decisions will hinge on incoming data, including inflation trends, global developments, and domestic demand indicators. The CBA’s proactive monitoring will be crucial in addressing emerging risks, ensuring sustainable economic progress.