EDB forecasts Armenian inflation at 4.4% and rate hike to 7.25%

The Eurasian Development Bank (EDB) expects Armenia's Central Bank to raise its refinancing rate to 7.25% by the end of the year and forecasts consumer price growth of 4.4% year on year. The projection sits in the bank's latest macroeconomic review, published after the regulator had already tightened policy once this month.

The numbers behind that forecast show an economy cooling unevenly. Annual inflation held at 4.3% in October, unchanged from September, according to the EDB review. Food inflation decelerated to 5.6% year on year, down from 6.2%. Non-food and services inflation, however, moved in the opposite direction.

What is pushing prices up?

Growth in prices of non-food goods accelerated to 2.8% year on year, from 2.4% a month earlier, the review states. Services inflation quickened to 3.2% from 2.9%. The EDB attributes the acceleration to two factors: rising fuel costs and sustained domestic demand.

That combination matters for the policy outlook. Food prices, the component that dragged the headline figure for months, are easing. The pressure has shifted to the categories most sensitive to demand and energy costs — a pattern that monetary policy can address more directly than food supply shocks.

Why did the Central Bank act?

On November 3, 2026, the Central Bank of Armenia raised its refinancing rate by 25 basis points, to 7.0%. The EDB review describes the decision as a response to three conditions:

• Inflation persistently exceeding the Central Bank's target range
• Signs of overheating domestic demand
• External pro-inflationary pressure

Each of those justifications rests on a judgment rather than a published number. The review does not specify how far inflation sits above the target band, nor does it quantify the external pressure it cites. What the document does make clear is the direction: the regulator sees demand running hotter than the economy can supply, and it is prepared to keep tightening.

How high can the rate go?

The EDB's baseline has the rate at 7.25% before the year ends — one more 25-basis-point move after the November decision. Consumer prices, in that scenario, close the year at 4.4% year on year.

Two caveats follow from the review's own arithmetic. First, the forecast of 4.4% is slightly above the October reading of 4.3%, meaning the EDB does not expect inflation to fall in the near term even with tighter policy. Second, the projection assumes the disinflation in food continues at roughly the recent pace; the review notes that the deceleration to 5.6% came from 6.2%, but it does not commit to a further slowdown.

The interest-rate path also depends on fuel costs, which the EDB identifies as a driver of the non-food acceleration. A renewed rise in gasoline prices would push against the bank's baseline. The review does not model that scenario explicitly.

For regional trade and retail, the stakes are straightforward. A 7.25% policy rate raises borrowing costs for consumer credit and trade finance across Armenia. Slower credit growth typically weighs on like-for-like sales in durables — the same non-food category where prices are now accelerating on the back of demand.

What remains unanswered

The review is a forecast, not a commitment. The Central Bank has not published its own rate path beyond the November 3 decision, and the EDB gives no probability for a larger hike or a pause. Its numbers — 4.4% inflation, 7.25% rate — frame the most likely outcome as the bank's analysts see it. The market will test that view at the regulator's next scheduled policy meeting.