Annual Report 2019

28 CENTRAL BANK OF ARMENIA Under the inflation targeting strategy, the Central Bank communicating to the public is crucial, and the main way of doing it is through publishing quarterly inflation reports². First part of the inflation report contains the monetary policy program for that quarter and the second part provides status report on implementation of the monetary policy program for the past one-year horizon. Fulfilling price stability objective A ccording to the Q1, 2019 Monetary Policy Program, the inflation environment would remain low at the beginning of 2019 and the Central Bank would continue implementing an expansionary monetary policy. In view of the latter and expected macroeconomic developments, the 12-month inflation rate would still be persisting at a low level in the near future, since the Central Bank favored a gradually recovering inflation, estimating that low inflation at that time was to contribute to anchoring long-term inflation expectations and enhancing public confidence in the monetary policy conducted by the Central Bank, and that it would stabilize around the 4% target in the medium run. It was also predicted that, if macroeconomic developments unfolded according to the baseline scenario, the Central Bank would keep monetary conditions expansionary for as long a period as needed in order to fulfil the inflation target in the medium run. Low inflation observed in the course of 2019 was attributable mainly to contractionary fiscal policy implementation during the year and to the inflation environment in the world's commodity markets weakened amid continued slowing of global economic growth. At the same time, some supply-side factors containing inflation, noticeable during the year, included increasingly competitive commodity markets, which has changed firms' approach to pricing and reduced their markups, and shifted demand from the market of non-durable consumer goods to that of durable goods. 2. See in detail the "Inflation Report" of the Central Bank: (www.cba.am). ANNUAL REPORT 2019

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