Armenian central bank keeps policy rate unchanged at 6.50%

At its March 17, 2026 meeting, the Board of the Central Bank of Armenia decided to keep the refinancing rate at 6.50%, the Lombard repo facility rate at 8.00%, and the deposit facility rate at 5.00%. In the first quarter of 2026, annual inflation accelerated, reaching 4.3% in February. The Central Bank said in its 2026 Q1 Executive Monetary Policy Statement that during the same period, annual core inflation increased to 4.7% Y-o-Y. In the first quarter of 2026, risks of a further slowdown in demand conditions in the global economy and in Armenia’s key partner economies significantly increased.

In the United States, the structural characteristics of economic growth, reflecting developments in the technology sector, as well as risks of a further correction in financial asset prices, a weakening labor market, and the sharp increase in global oil prices may negatively affect the medium-term growth outlook.

The macroeconomic implications stemming from US trade policy have somewhat weakened, but continue to remain one of the main sources of uncertainty. In the medium term, uncertainty regarding long-term interest rates has increased amid expectations of rising US public debt, partly due to uncertainty over the possibilities of tariff collections.

In Armenia’s other main partner economies, risks of weakening medium-term growth and demand are gradually materializing. At the same time, geopolitical uncertainty, tensions in international trade relations, and concerns regarding potential disruptions in global supply chains continue to remain a key source of elevated price volatility in the global economy. Global oil prices have increased sharply amid escalating tensions in the Middle East, while uncertainty regarding their outlook has increased significantly. Food prices have also exhibited some volatility amid concerns regarding potential disruptions in global supply chains. In this context, taking into account, on the one hand, the formation of a weak demand environment, and on the other hand, the increase in inflationary risks, it is likely that central banks in major economies will maintain or delay the easing of monetary conditions in the near term. In the fourth quarter of 2025, economic growth in Armenia significantly accelerated. High economic growth continued to be driven by the construction and services sectors, as well as by manufacturing. Uncertainty regarding current demand conditions and future developments has sharply increased, particularly due to structural issues in economic growth and risks related to fiscal expansion․ In this context, the impact of aggregate demand on inflation is assessed as expansionary. There are also inflationary risks driven by supply-side factors.

At the same time, private wage growth, services inflation characterized by sticky prices, and inflation expectations continue to show signs of stabilization. In the context of current macroeconomic developments, financial market participants in Armenia generally expect the Central Bank to maintain the current level of the policy rate for a somewhat longer period, followed by a l reduction toward 6.25% in the medium term. Amid the discussed risks and prevailing uncertainty, the Board considered, on the one hand, Case A-type scenarios related to a possible increase in global neutral interest rates driven by fiscal policy, as well as risks of the formation of excess demand conditions and fiscal expansion in the domestic economy, which would require a higher policy rate path relative to market expectations.

On the other hand, the Board discussed Case B-type scenarios related to the outlook for a slowdown in global economic growth and a possible decline in Armenia’s country risk premium, implying the formation and deepening of a weak demand environment, which would require a lower policy rate path relative to market expectations. As a result, balancing the need to manage risks in both directions, the Board of the Central Bank of Armenia decided to keep the policy rate unchanged in the current phase. The Board will continue to monitor developments in the economy and stands ready to take appropriate actions to ensure the 3% inflation target and price stability in the medium term.