For the first time since 2006, the Central Bank of Armenia (CBA) is revising its key inflation target, reducing it from 4% to 3%. This decision, set to take effect in 2025, reflects the increasing maturity of Armenia’s economy and aims to enhance citizens’ purchasing power and the country’s investment appeal, according to the CBA’s statement.
Over the past 18 years, the CBA has maintained an average annual inflation rate of approximately 4%, a significant indicator of the effectiveness of its monetary policy. However, the statement highlights that Armenia's economy has undergone substantial changes, becoming "more diversified and integrated into international markets."
“Lowering the inflation target will create a more stable macroeconomic environment and help protect household incomes,” the CBA noted. It emphasized that low and stable inflation is particularly beneficial for low-income groups who lack access to financial tools to hedge against rising prices.
The new target allows for fluctuations within a ±1 percentage point range, a narrower margin compared to the previous ±1.5 percentage points, signaling greater precision in price control. According to the CBA, a lower inflation target should contribute to reduced market interest rates and attract long-term investments.
“This decision also reflects a societal shift in Armenia from a borrower-oriented model to one centered on savers and investors. Low inflation safeguards citizens’ savings and fosters long-term investments, which are critical for sustainable economic growth,” the statement explained.
International experts and investors already regard Armenia as a country with an advanced monetary system. Lowering the inflation target is expected to strengthen this perception, attract foreign investments, and improve the nation’s credit ratings.
