Armenia's core inflation stands at 3.7% year-on-year in August

At its meeting today, the Board of the Central Bank of Armenia decided to keep the key policy rate (refinancing rate) unchanged at 6.75%.

Annual CPI inflation increased slightly in Q3 2025, standing at 3.6% in August. Meanwhile, core inflation edged up, standing at 3.7% Y-o-Y in August.

In Q3 2025, risks of a further slowdown in demand conditions globally and in Armenia’s key partner economies persist, while inflationary pressures in the US have intensified. Uncertainty surrounding US trade policy and its macroeconomic implications remains elevated. Uncertainty has also increased regarding the medium-term implications of US fiscal policy, including the extent of aggregate demand support, the resulting rise in public debt, and its potential impact on long-term interest rates. At the same time, persistent geopolitical uncertainty and tensions in international trade relations continue to pose risks of supply chain disruptions and renewed global inflationary pressures. Further, global food prices have ticked up since the beginning of the year, primarily driven by supply factors. A persistence of these trends could be a primary source of further increases in global inflationary pressures. In this context, considering weakening demand conditions on the one hand and persistent inflationary risks on the other, central banks in major economies would be expected to either maintain or gradually ease their tight monetary stance.

In the third quarter of 2025, economic activity in Armenia continued to accelerate. Growth in demand-driven sectors continues to offset the gradual dissipation of certain short-term, non-structural growth drivers. Sustained, robust growth in the construction and services sectors has remained the key driver of overall economic activity. Following sustained declines in 2024 and Q1 2025, external demand for services has increased in Q2 and Q3. At the same time, uncertainty remains elevated regarding the sustainability of this growth, its long-term trajectory, and the future outlook for domestic demand. In this context, demand continues to have a neutral impact on inflation, while recent increases in headline and core inflation have been driven by supplyside factors. Wage growth, non-traded sticky price inflation, and inflation expectations continue to stabilize. At the same time, risks for medium-term demand pressures from fiscal policy persist.

In the context of current macroeconomic developments, financial markets in Armenia generally expect the Central Bank of Armenia to gradually lower the refinancing rate over the next twelve months to approximately 6.25%.

In order to manage possible risks stemming from conditions of high uncertainty, the Board considers multiple scenarios during its deliberations. On the one hand, the Board discussed Case A-type scenarios where possible underlying developments would require a higher path for the policy rate relative to current market expectations. This includes scenarios related to risks of a rising neutral rate globally and in Armenia in the context of fiscal policies, as well as risks of expanding demand conditions. On the other hand, the Board also discussed Case B-type scenarios where potential economic developments imply a more rapid and aggressive downward path for the policy rate than what is currently priced in markets. These scenarios include concerns regarding a weak demand environment forming and deepening in the economy due to a potential gradual adjustment of real estate prices, as well as overall concerns about the outlook for the global economy.

Seeking to manage the macroeconomic implications that could stem from Case A-type scenarios materializing, the Board finds it appropriate to keep the policy rate unchanged in the current round.

The Board resolutely affirms its commitment to adopting the appropriate policy actions and strategy to ensure the price stability objective of 3% inflation in the medium term.