In some cases the activities of the central bank are transparent. Last week the CB published the “monetary policy”. It hasn’t been studied by specialists yet. The total analysis of this document will take some time. But there is one point in the program which had to be a subject for serious discussions among economists. They write in the project: “As of 2006 the CB will start the process of transforming into a means of providing inflation”. According to our legislation the only body that is responsible for inflation control is the CB. This is their main responsibility. I mean they always used to announce the planned level of inflation at the beginning of the year and then tried not to exceed that level throughout the year. They have always done things this way. The CB used to announce that the inflation for primary goods would cover 3 %. And later they used to write a statement at the end of the year that the inflation mark for those products was the same mark as they had planned. And then they gave different answers to the question “how can they do that?”. The CB usually answered that this was a result of their good work. According to some specialists this was done spontaneously and the CB didn’t play any role in it. Their explanations are logical and I think this is worth mentioning. The economical growth mark has nothing to do with citizens. This is what the international financial and economical institutions that make evaluations of our economy say. In fact, income received from the citizens doesn’t really play a major role. According to different evaluations the public income growth covers 5-15 %. The poverty rates are going down very slowly. If we look at it from an economic perspective, it is very simple: it is impossible to provide high rate of inflation in a poor market. According to this explanation inflation is not kept down by the CB, but by the low level of the purchasing power of people. The advocates of this explanation bring up the example of 2002. The inflation mark exceeded the planned level for 2,5 times in 2002. This time the explanation of the CB was very interesting: they couldn’t keep the rate the same due to the fact that the world prices for grain had increased. But this time the CB is not afraid of the expected increase of the world price for gas. Despite everything the CB expects to have 3 % inflation in 2006. Now we can say that the experience of the past years is over, because: “the CB is going to transform to the inflation planning strategy, which is widespread in the world”. The strategy of inflation planning is something new in the world economy. Specialists say that this method is applied since 1990. In a word, this method gives a chance to make the price changes stable in the best way possible. Really, there are a lot of countries in the world that apply this method. But as a rule this method is applied by countries with strong economies: European countries, the US, etc. For example Japan, an economically developed country, has announced that it will apply this method too. Russia, Turkey and some other countries have also announced that they may apply this policy in their country too. It has been about ten years that these countries don’t take the risk to apply this policy in their country, but our CB announced that this policy is going to be their main goal of this year. It may not be clear why they did this, but for sure we will be able to see the results in a couple of years.
Generally we can’t say that the program, announced by the CB, is worth to look at as something interesting. But particularly there are funny things in the project to read. The program, which was printed in the press on February 3, writes about the end of 2005 as a prediction: “In October, 2005, the registered inflation mark was lower by 0,5 % compared to the same mark in the same period of the previous year, as for the expected inflation mark at the end of the year, it will be around the predicted level: 0,5 %”. The CB doesn’t hesitate to announce each time that “they are not going to make any predictions on the currency exchange rates” and “they are not going to make predictions on interest rate either”. Actually they don’t predict anything, but in any case they do make it up. The CB had also had a surprise in store last week. They made the refinancing rate higher. We can consider it as a part of the planned inflation policy. It seems that the increase in the price for money doesn’t have any simple economical explanations in Armenia. In these years there seems to be no lack of money in Armenia. All the economical fields were complaining about the high price for money. At least the interest rate for credits started to go down, slowly, but it was going down, and as well as new fields of providing credits were being formed. And in spite of all this the CB unexpectedly made the refinancing interest rate go up to 4% (from 3,5). The advocates say that this step was taken thanks to the “Millennium challenges” program. But according to specialists in case of high interest rates financial speculations are more profitable.