Armenia’s Central Bank Governor Martyn Galstyan said pronounced excess demand in the economy prompted the regulator to raise the refinancing rate. He made the remarks on September 15 at a press conference explaining the Central Bank Board’s decision.
The Central Bank raised the refinancing rate from 6.5% to 6.75% after keeping it unchanged for nine months. Galstyan said that while the pickup in inflation in June and July had largely been driven by supply-side factors, demand-side pressures have now become an additional driver.
According to the governor, stronger domestic and external demand has been fueled by a new large wave of relocants arriving in Armenia. In his assessment, that has reignited faster price growth in the services sector, where prices are usually less volatile. Demand has increased noticeably in recent months, feeding into higher prices for services, goods and assets, including real estate.
Galstyan said the Central Bank is now seeing faster economic growth, stronger demand from abroad and a new inflow of people and capital, all of which are adding to inflationary pressure. He noted that inflation had previously moved beyond the target range mainly because of supply shocks, but demand expansion has now added to the risks.
He also pointed to another, though less pronounced, factor behind the decision: a new survey showed that the number of citizens expecting high inflation has increased. In his words, the combination of excess demand and rising inflation expectations was the main reason the Central Bank opted to raise the rate.
At the same time, Galstyan said the substantial inflow of capital is mostly being reflected in reserves and has not yet had a major impact on the market. Still, the external price environment remains a concern. He said the FAO index has risen 6.1% since the start of the year, while Brent crude reached $107 per barrel as of September 15.
He also warned of added risks if, alongside the already introduced restrictions on exports of many goods to Russia, gas prices were also to rise in Armenia. In his view, that scenario could have a double effect: lifting inflation further while also materializing risks of an economic slowdown.
Galstyan said the Central Bank had considered such a scenario as well, but for now is proceeding along a “standard course,” while keeping in mind that any materialization of these risks may require a tougher and non-standard response.
From mid-December 2025 to September 15, 2026, the Central Bank of Armenia had kept the refinancing rate at 6.5%. Before that, from mid-2023, the key rate had been reduced by a cumulative 4.25 percentage points from a historic high of 10.75%.
Official statistics show that Armenia recorded 4.4% inflation in August 2026 compared with August 2025, versus 3.6% a year earlier. The Central Bank’s measure of annual core inflation stood at 4.8% in August, compared with 3.7% in the same period a year before.
Since 2025, the inflation target has been set at 3% with an allowable deviation range of +/- 1 percentage point, compared with the previous 4% target and +/- 1.5 percentage points. In effect, by September 2026 inflation had already moved above the upper end of that tolerance band.
