Martin Galstyan: Under favorable conditions, loan interest rates may  drop

ArmInfo.At the moment, the reduction of the key rate does not affect interest rates on loans.  Head of the Central Bank of Armenia Martin Galstyan stated during a press conference on June 11.

However, in the case of a positive development of processes, and if  the Regulator continues to reduce the refinancing rate, and the  uncertainty component in some sense disappears from the economy,  then, according to the head of the Central Bank, interest rates on  loans will begin to decline. "When we gradually increased the  refinancing rate - from 4% to 11%, then, for example, mortgage rates  did not increase proportionally by 7 p.p. The growth was registered  at a level of 1.5% to 2%,"  Galstyan said. That is, there was no  proportionate growth, either at the upper or lower threshold.

At the same time, he noted that the lending activity of banks also  depends on what deposits they managed to attract. "The question is  how much the average citizen or business is ready to lend a bank. For  example, are they ready to invest in a deposit at a rate of 6%, so  that the bank will then lend at 9-10% per year?", - the head of the  Central Bank asked.

When asked what the purpose of reducing the key rate is, Martin  Galstyan noted that in a certain sense this should stimulate  activity, but the accompanying factors that are present both in  Armenia and in the region, as a whole, are still having a negative  impact. "We are trying to activate the economy through such channels,  but geopolitical factors play an extremely important role here," he  noted, naming in this vein the Russian-Ukrainian conflict,  Armenian-Azerbaijani relations, the process of demarcation and  delimitation of the border. 

Today the Board of the Central Bank of the Republic of Armenia  decided to reduce the Refinancing Rate by 0.25 percentage points -  setting it at 8% from 8.25%. In accordance with this, the Lombard  Repo Facility Rate was set at 9.5% from 9.75%, and Deposit Facility  Rate was set at 6.5% from 6.75%.  According to the Statistical  Committee of the Republic of Armenia, as of the end of April this  year, the average indicator of Armenian banks' credit rates in drams  is 12.50%, on deposits - 8.43%.