CBA Releases Monetary Policy Report: What It Means for Depositors

The Central Bank of Armenia has published its 2025 monetary policy report. The refinancing rate has been lowered to 6.5%, while annual core inflation has stabilized at 3.8%.

AFM analysts have broken down the latest data to explain the implications for depositors and their real returns.

Real Yields Are Narrowing

When the central bank cuts the key rate, commercial banks typically follow suit by gradually lowering interest rates on new deposits.

For instance, if a dram-denominated deposit offers an 8.5% annual yield while inflation sits at 3.8%, the real yield is approximately 4.7%. This is the portion of your profit that actually increases your purchasing power.

As policy easing continues, this spread could shrink even further.

AMD vs. Foreign Currency Deposits

AMD Deposits

New offers may become less attractive. Conditions for short-term deposits are usually the first to reflect these changes.

Foreign Currency Deposits

Rates for USD and EUR are traditionally lower. However, inflation within those currencies also erodes final returns, meaning a shift to foreign currency does not guarantee the preservation of profit.

How Depositors Are Responding

In a falling-rate environment, investors typically pivot toward one of the following strategies:

1. Locking in yields via long-term deposits before further rate revisions occur.
2. Exploring government bonds, where yields may currently outperform traditional bank deposits.
3. Considering floating-rate instruments tied to inflation or the central bank’s key rate.

This report signals the gradual end of the era of relatively high deposit rates. It is crucial for depositors to focus on real yields rather than nominal percentages and to proactively reassess their capital allocation strategy.