How Do We Make Monetary Policy Decisions?
This section describes the Central Bank of Armenia’s framework, procedures, and institutional setup for making monetary policy decisions.
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. These decisions take place eight times per year on fixed action dates. The decision-making process follows a comprehensive and well-defined process, intended to support high-quality decisions supported by Board-staff collaboration and active dialogue, sound analysis, and open and honest deliberations among Board members.
The Central Bank of Armenia’s monetary policy framework is known as FPAS Mark II. The FPAS Mark II framework was designed and implemented by the CBA in recognition of the increasingly complex risks and uncertainties that policymakers face. It introduces a structured and systematic approach to thinking of monetary policy as a risk management exercise along with a framework for implementing policies of “least regrets.” The CBA emphasizes the importance of a strong institutional setup to support its implementation. This includes the continuous development of human capital, ensuring a highly skilled, mission-driven staff capable of conducting robust economic analysis and supporting decision-making processes.
The Central Bank of Armenia places great emphasis on the importance of robust, high-quality economic analysis to support policy decisions. As part of this commitment to analytical excellence, the CBA utilizes a best-in-class analytical toolkit, including the quarterly projection model incorporating crucial nonlinearities such as endogenous policy credibility. At the same time, we continue to emphasize the role of models as tools that help policymakers and economists think better.