Decision-Making Process
Monetary policy decisions are made by The Board of the Central Bank of Armenia. The Board decides the policy rate which it considers appropriate to steer inflation towards the 3% target over a medium-term (12-quarter) horizon.
Eight times per year, at fixed action dates, the Board of the Central Bank of Armenia decides on monetary policy and sets the policy rate. On an alternating basis, four of the eight decisions (one per quarter) follow a full projection round, the details of which are presented below. The remaining four decisions, referred to as “interim” decisions, follow a more streamlined process. In any economic situation, the Board designs and implements a program of current and future monetary policy actions that is intended to guide inflation and inflation expectations to the target with the minimum possible economic costs. The respective Time Table of CBA Board’s Decisions is published at the end of November of each year on our website.
Monetary Policy Decision Dates
Under our new FPAS Mark II policymaking framework, the policymaking sequence proceeds as a collaborative and dynamic 29-day process (see the table below). To begin the policymaking round, the Board meets in a kick-off meeting intended to spur robust discussion about the most pressing risks and uncertainties that represent causes of concern. Following the kick-off meeting, the Board members each outline the essential ingredients and develop structured and qualitative assessments of the key policy-relevant risks. These risk assessments serve as one of several important inputs to the Staff as they build out the illustrative case scenarios and the Taxonomy of Scenarios. The purpose of this taxonomy is to provide a structured assessment of the different types of risks and shocks that can affect the Armenian economy and describe their impact on inflation and economic environment in Armenia, as well as loosely illustrate implied monetary policy reactions by the CBA. It allows the reader to more effectively understand the wide range of information, ideas, and opinions that are held by various stakeholders, from the Board and Staff of the CBA to financial markets and the public.
Two weeks before the decision day, the Scenarios meeting is held between the Board and the Staff. After having the big picture of Board concerns, the staff, led by the Projection Coordinator, presents the narratives for illustrative Case A and Case B scenarios. The scenarios are illustrative in nature and are not formal projections, primarily serving as a helpful communications device. Afterwards, Chief economist and projection team systematically build illustrative Case A and Case B scenarios. The Projection team then submits final Case A and Case B scenarios to the Board three days in advance of the Policy Decision. Once these scenarios have been submitted as final, they are not subject to any further changes.
Against the backdrop of the prior 28 days’ lively discussions and debates of the ingredients, along with the submission of the final Case A and Case B scenarios, Board members would take a vote on the policy decision. The decision-making process follows a majority vote format, with the Governor serving as tie-breaker if necessary. The Board’s decision would be announced in tandem with issuance of the Monetary Policy Report, which would clearly communicate through a narrative approach the Board’s decision with reference to the scenarios and ingredients considered by policymakers to be most relevant to the current situation and its uncertainties. This is followed by the Governor-led press conference with members of the media, which is live-streamed to the public. We publish our Transparency Report with each decision that clearly and transparently communicates the rationale supporting the Board’s decision.
Similar to the process leading up to the quarterly decision, the policymaking cycle during the interim decisions is intended to follow a dynamic approach. The analytical process and discussions among Board members and between Board and Staff primarily take place during the weekly monitoring meetings. During each weekly monitoring meeting, the Staff updates the Board on new economic developments, data, and risks. These meetings follow a narrative-based format, linking new information to broader economic trends and ongoing discussions from previous quarterly rounds. The decision meeting follows the same approach as the final deliberations of the quarterly decision round. The interim decision is announced to the public via the Executive Monetary Policy Statement, which contains a brief description of the Board’s decision and its rationale, as well as a concise summary of economic conditions. This is followed by the Governor-led press conference with members of the media, which is live-streamed to the public. We publish our Transparency Report with each decision that clearly and transparently communicates the rationale supporting the Board’s decision.