LowIV Macro Policy & Sovereign Debt3 November 2026, Tuesday
Armenia's central bank raises rates for a second straight time
The Central Bank of Armenia raised its refinancing rate by 25 basis points to 7% on 3 November. It was the second move after the increase on 15 September; the bank aims to bring inflation down to its 3% target.
According to Interfax, the rate had held at 6.5% after a 25-basis-point cut in December 2025 before rising to 6.75% on 15 September. According to ArmBanks, the board linked its decision to excess domestic demand, external demand that has strengthened in recent months, and supply-side inflation that could come from energy and global food prices. The board judged scenarios with a higher rate path than markets expect to be more likely.
Sources diverge on the inflation figure. Interfax put annual inflation in October at 4.1%, while ArmBanks, citing the statistics committee, gave 4.3%. Hetq reported 4.5% for August and 4.3% for September. Which is correct could not be verified from these sources; on all three, inflation is above the 3% target.
Hetq listed among the reasons for the decision high energy prices linked to tension in the Middle East, and tourism pushing up wages and service prices. It also noted that possible restrictions on exports to Russia could create a supply glut in the domestic market. According to ArmBanks, net private transfer inflows from abroad exceeded 2 billion dollars in January–September 2026, against 1.02 billion dollars a year earlier.
Talay assessment
Bottom line
Yerevan is tightening as the Gulf war lifts energy prices and doubled transfer inflows push up domestic demand at the same time. Two small steps suggest the bank fears persistent excess demand more than a sudden shock. Talay's reading is that the bank will not turn to easing until uncertainty over trade with Russia clears.
Likely effects
- Credit conditionsNegative1–6 months
Two 25-basis-point increases add up to 50 basis points of tightening and will slow credit growth.
- DramPositiveWeeks
Higher rates and transfer inflows above 2 billion dollars support the value of the national currency.
- Trade with RussiaUncertain1–6 months
Possible restrictions on exports to Russia could create a domestic supply glut and partly offset price pressure.
Possibilities, ranked
- 1Hold55%
The bank pauses at 7% and watches for inflation to fall below 4%.
Watch: Where November annual inflation stands relative to the 4% threshold
- 2A third increase30%
Energy and service prices stay high and the bank lifts the rate to 7.25%.
Watch: Monthly service price inflation and tourism revenue
- 3Early easing15%
Russian export restrictions bring domestic prices down and the bank returns to cuts in early 2027.
Watch: Export data to Russia and food prices
Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.
Market reaction
Indicators affected
- Refinancing rate▲ 7.00%
- Net transfer inflows (9 months)▲ $2bn+