Executive Monetary Policy Statement February 2026

2026 February
Executive
Monetary
Policy
Statement
Published February 3, 2026

Executive Monetary Policy Statement | February 2026 2 A. Executive Monetary Policy Statement The Board of the CBA decided today to keep the refinancing rate unchanged at 6.50%. At its meeting today, the Board of the Central Bank of Armenia decided to keep the key policy rate (refinancing rate) unchanged at 6.50%. Annual CPI inflation decreased in Q4 2025, standing at 3.3% in December. Meanwhile, annual core inflation accelerated, standing at 4.3% Y-o-Y. In the first quarter of 2026, risks of a further slowdown in demand conditions in the global economy and in Armenia’s key partner economies persist. Consumption in the U․S․ continues to drive relatively high economic growth and an elevated inflationary environment. Nonetheless, the structural characteristics of economic growth reflecting the developments in the technology sector, as well as risks of a further correction in financial asset prices and weakening labor market, could negatively impact the medium-term growth outlook. The macroeconomic implications stemming from U.S. trade policy have weakened, but continues to remain one of the main sources of uncertainty. Uncertainty regarding the medium-term implications of U․S․ fiscal policy, including the impact of rising public debt on long-term interest rates persists. In Armenia’s other main trading partner economies, risks of medium-term weakening growth and demand are beginning to materialize. Global oil prices continue to decline, while in recent months global food markets have been transmitting predominantly disinflationary pressures. However, geopolitical uncertainty and tensions in international trade relations remain a key source of global price volatility. In this context, considering weakening demand conditions on օne hand and persistent inflationary risks on the other, central banks in major economies would be expected to either maintain or ease monetary conditions gradually. In the fourth quarter of 2025, economic activity in Armenia accelerated. High economic activity continued to be driven by growth in the construction and services sectors, as well as the impact of certain short-term, non-structural factors in the manufacturing sector. Uncertainty remains elevated regarding the demand outlook. In this context, demand continues to have a neutral impact on inflation, while current inflation developments have been partly driven by certain supply-side factors. In parallel, wage growth, services and sticky price inflation, and inflation expectations continue to stabilize. In the short term, risks of demand pressures from fiscal policy persist. In the context of current macroeconomic developments, financial market participants in Armenia generally expect the Central Bank of Armenia to gradually lower the policy rate in the medium term to 6.25%. Amid high uncertainty, the Board discussed, on the one hand, Case A-type scenarios related to a possible rise in global neutral interest rates driven by fiscal policy, as well as the formation of
excess demand conditions in the domestic economy, which would require a higher policy rate path relative to market expectations. On the other hand, the Board also discussed Case B-type scenarios including concerns regarding the outlook for a slowdown in global economic growth and the formation and deepening of a weak demand environment in Armenia’s economy, which would imply a lower policy rate path relative to market expectations. As a result, balancing the need to manage risks in both directions, the Board of the Central Bank of Armenia decided to keep the policy rate unchanged, in line with market expectations. The Board resolutely affirms its commitment to adopting the appropriate policy actions and strategy to ensure the price stability objective of 3% inflation in the medium term. Approved by the Board of the Central Bank of Armenia February 3, 2026 Governor Martin Galstyan Deputy Governors Armen Nurbekyan Hovhannes Khachatryan Board Members Artak Manukyan Levon Sahakyan Narek Ghazaryan Armen Ktoyan

Executive Monetary Policy Statement | February 2026 3 B. Summary of Economic Conditions Global Economy The global economy remained stable in the fourth quarter of 2025, while sending mixed signals regarding the prospects for further growth. Due to rapid technological developments and flexible reconfiguration of trade flows, the negative effects stemming from trade policies have weakened, although they remain one of the main sources of uncertainty. In the first half of 2025, after volatile growth amid uncertainty surrounding external trade policy, the U.S. economy recorded strong growth in the third quarter of 2025, reaching an annualized rate of 4.4%. According to current estimates of the Federal Reserve Bank of Atlanta, growth accelerated further in the fourth quarter to 5.4%. The acceleration in economic growth has largely been driven by an expansion in consumption, continued growth in investment activity in artificial intelligence, and a significant improvement in the trade balance observed as a result of tariff policy. Nevertheless, the uncertainty of the sustainability of these developments remains high. Economic developments also convey mixed signals in terms of interpreting demand conditions. High prices of financial assets continue to stimulate growth in consumption and investment among high-income households, whereas a sharp slowdown in wage growth among low-income households, a decline in consumer lending, and the accumulation of overdue loans signal weakening demand. Under the current structure of consumption, a potential correction in financial asset prices may worsen the demand outlook in the United States, which in turn could negatively affect global demand conditions. Amid the U.S. expansionary fiscal policy, uncertainty surrounding the medium-term outlook for the deficit and public debt has increased, including given issues related to legal challenges to the imposed tariffs, containing risks of a potential rise in long-term interest rates. Such developments could impact not only the future course of the Federal Reserve’s monetary policy but also global interest rates and capital flows to emerging economies. During the fourth quarter of 2025, inflation showed signs of slowing and in December stood at 2.7% year-on-year, which remains above the target. Strong consumption growth may further support inflation pass-through from external trade policy to domestic prices. At the same time, despite a certain increase in unemployment, the number of layoffs and new hires has remained relatively stable, likely reflecting an ongoing process of rebalancing. Nevertheless, amid uncertainty regarding further developments and inflation still above target, the Federal Reserve’s task of ensuring price stability and full employment has become more complicated. In the third quarter of 2025, economic growth in the Euro area remained at a low level, continuing to reflect structural challenges and uncertainties arising from global trade policy. The
inflation environment continued to stabilize, approaching the target level. However, during the fourth quarter of 2025, certain leading indicators have been sending mixed signals. While core inflation indicators are close to the target, services inflation remains significantly elevated amid weak signals of easing tight labor market conditions. The growth outlook remains uncertain given existing structural problems. Growth polarization and uncertainty surrounding trade policies are leading to more cautious behavior, adversely affecting consumption and investment decisions in the Euro area. At the same time, fiscal stimuli aimed at addressing structural issues may have a positive impact on certain productive sectors. On the other hand, measures to stimulate the defense industry may entail risks of uneven economic development and an expansion of inflationary pressures. Trends toward the formation of excess supply in the global oil market persist, exerting downward pressure on international oil prices, while geopolitical tensions also contribute to elevated volatility in these prices. Uncertainty persists regarding the medium-term outlook. On the one hand, excess oil supply amid weakening global demand could generate additional downward price pressures. On the other hand, a potential escalation of geopolitical tensions, including the imposition of secondary sanctions against Russia and Iran, could pose upward pressure through potential supply chain disruptions. In Q3 2025, Russia’s economic growth continued to weaken significantly to 0.6% Y-o-Y. At the same time, in Q4, sustained growth in economic activity in services and retail trade suggests some recovery in consumption and demand conditions. On the other hand, declining consumer lending and the continued increase in the share of non-performing loans could point to greater weakening in demand conditions, as well as the accumulation of structural issues in certain sectors of the economy. In recent months, headline and core inflation have slowed meaningfully, while services inflation and inflation expectations still remain elevated. Labor market conditions continue to remain exceedingly tight; nonetheless, in Q4, some signals of easing have emerged, reflected in a decline in labor demand and a slowdown in real wage growth. Uncertainty persists surrounding oil prices, posing risks to fiscal policy, while tightening tax policies aimed at structural changes in the composition of budget revenues could negatively impact domestic demand conditions. The combination of weakening economic activity on the one hand and elevated services inflation and inflation expectations on the other pose serious challenges to the Central Bank of Russia in managing the inflation-output tradeoff in the short term. Domestic Demand Conditions In Q4 2025, economic activity in Armenia accelerated, formed at a high level, standing at 14.1% Y-o-Y in December. In H2 2025, and especially in the final months of the year, a significant
increase was recorded in the volume of external trade activity, which largely contributed to the acceleration in economic activity growth. Nonetheless, it is important to note that value-added in the aforementioned sector remains relatively low. Growth in economic activity continued to be concentrated primarily in demand-driven sectors, including construction and services, which could pose risks to the future sustainability of growth and the long-term outlook. Construction continues to grow at a rapid pace, however, persistent risks of a gradual adjustment in real estate prices amid the formation of potential excess supply in this segment

Executive Monetary Policy Statement | February 2026 2 could threaten growth in construction and adjacent sectors, contribute to weakening demand conditions, and pose deflationary pressures. Although services growth remains driven by IT and Financial Services, signs of sustained high growth in other services subsectors in recent months can indicate stable and expanding demand conditions. On the other hand, since the beginning of the year, trade sector growth has slowed amid a gradual fading of certain short￾term, non-structural factors. Nonetheless, wages and employment in the sector continue to grow at a stable pace, which provides mixed signals regarding the sector’s future outlook. Activity in manufacturing has increased, reflecting not only accelerated growth in traditional subsectors but also the recovery of certain non-structural factors. Following a slowdown in tourist inflows in September 2025, tourism flows to Armenia in Q4 stood above historical levels, accompanied by some changes in composition and structure. At the same time, external demand for domestic goods and services, especially IT and financial services, remains elevated. In the medium term, the outlook for external demand will largely depend on risks of weakening demand conditions globally and in Russia, as well as future geopolitical developments. Uncertainties remain elevated about seasonal migration to Russia and the channels through which remittances are transferred. On the one hand, a persistently stable ruble at current levels could increase incentives for labor migration from Armenia to Russia. On the other hand, elevated uncertainty regarding the medium-term outlook for the Russian economy and tightening migration policies could limit migration flows to Russia, supporting labor supply growth in Armenia and contributing to the formation of deflationary risks. In summary, various signals indicate a slightly positive output gap in Q4. Nonetheless, the structural characteristics of growth, uneven developments across sectors, and the impact of non-structural factors add uncertainty to assessments of the relative position of aggregate demand and aggregate supply. On the one hand, continued strong growth in lending activity, high growth in demand-driven sectors, and persistently elevated external demand could point to excess demand conditions in the economy. Conversely, the concentration of growth, the continued slowdown in retail trade, weak wage growth dynamics, and the persistence of stable, low inflation in services and non-exportable goods with sticky prices are not consistent with the formation of excess demand conditions and could point to a weak demand environment. In 2025, state budget revenues were fully executed, standing at around 101% of the revised annual plan. At the same time, state budget expenditures were under-executed, amounting to 95.4% of the annual plan. This was primarily driven by the under-execution of capital expenditures, which amounted to around
89.3% of the annual plan. As a result, according to the CBA’s current assessments, the 2025 state budget deficit amounted to around 3.5–4% of GDP, while fiscal policy had a close to neutral impact on aggregate demand. Assuming full execution of the planned 2026 budget, the fiscal impulse is assessed as neutral. Nonetheless, uncertainty regarding the impact of fiscal policy on demand will depend on the feasibility of the planned further tightening of tax administration amid a stabilization of growth following a period of high growth. On the other hand, risks persist that limited implementation capacity could lead to the under-execution of capital expenditures and, given their structural characteristics, imply a weaker impact on demand. Labor Market & Inflation Uncertainty surrounding labor market conditions remains. Unemployment declined in Q3 2025, standing at 11.8%. It should be noted that, according the labor force survey, labor resources in Q3 2025 increased Y-o-Y relative to the same quarter of the previous year; however, these increases were primarily reflected in the economically inactive population, while the number of employed persons declined. This could reflect weakening labor demand in the economy. At the same time, SRC data suggesting continued stable growth in the number of registered employees point to persistently high labor demand. Increases in the number of registered employees could also reflect structural changes in the economy, including a gradual shift of labor from informal to formal employment. Developments in wage growth also leave room for conflicting interpretations. On the one hand, the slowdown in wage growth in Q4 2025, standing at 4.6% Y-o-Y in November (quarterly basis), could point to some weakening in demand conditions. On the other hand, the weakening of sectoral concentration in wage growth and the acceleration of wage growth in services (excluding the financial and IT sectors) in Q4 (standing at 7.4% Y-o-Y in November, quarterly basis) could point to relatively stable demand conditions in the economy. Overall, considering various signals, labor market imbalances appear to have softened meaningfully, with conditions moving toward greater balance. The primary uncertainties in this context relate to the Russian economic outlook, the flow of Armenian labor migrants to Russia amid tightening Russian migration policies, domestic labor market participation, and the integration of economically inactive populations into the workforce. In the medium term, a potential expansion in labor supply could ease labor market conditions further and reduce market-driven pressures. In November–December 2025, inflationary pressures transmitted from the global economy softened meaningfully, resulting in a slowdown in annual inflation to 3.3% Y-o-Y in December. Looking ahead, the main uncertainties relate to the speed and scale of domestic price adjustments in the context of whether these trends will persist. At the same time,
underlying inflation accelerated, standing at 4.3% Y-o-Y in December. In particular, dairy prices accelerated sharply, reflecting price increases associated with labeling requirements, with inflation standing at 6.1% Y-o-Y in December compared to 1.6% Y-o-Y in August. It should be noted that price increases for certain goods exceed the costs associated with labeling, which suggests that these price changes are also due to other factors, including increased operational costs, adjustments to price-setting behaviors, and others. Meanwhile, deflationary pressures from non-food products observed since the beginning of the year have gradually subsided, entering weak inflationary territory beginning in May. Services inflation excluding air transport remains below target, in the range of 2.0–2.5%, standing at 1.9% Y-o-Y in December. Inflation for non-exportable goods with sticky prices, which largely captures price-setting behavior driven by domestic demand conditions, has stabilized around 2.0%, standing at 1.9% Y-o-Y in December. In this context, inflation expectations have continued to steadily decline, supported by a prolonged low-inflation environment.

Executive Monetary Policy Statement | February 202 6 3 Financial Markets & Monetary Policy Market expectations of the CBA policy rate path (per CBA surveys) have remained largely unchanged since the latest policy decision, and continue to reflect an expected gradual reduction in the policy rate over the next eight decisions toward 6.25%. In recent months, the yield curve has declined significantly across all maturities, a trend that continued through January 2026. This could reflect a number of factors, including: (a) improving sentiment toward emerging market bonds, as well as country -specific factors that could point to a downward reassessment of Armenia’s country risk premium by markets; (b) the gradual impact of long -term, structural factors, including declining long -term inflation expectations following the reduction in the inflation target at the beginning of the year, improving expectations regarding the public debt trajectory, and the expansion of capacities in the exportable sector of the economy contributing to expectations of greater real exchange rate trend appreciation; (c) the gradual transmission of monetary policy and the formation of expectations among some investors of further easing in financial conditions; and/or (d) non -structural factors, including, for example, increased AMD liquidity in domestic financial markets, particularly following the reduction in reserve requirement ratios, and others. In recent months, Armenia’s country risk premium has continued to decline, reflecting both global and country - specific factors. On the one hand, amid declining fiscal and trade uncertainty in advanced economies and structural reforms in emerging markets, sentiment towards emerging markets has improved meaningfully. At the same time, even though declines in Armenia’s risk premium have generally followed global trends in emerging market spreads, additional declines in recent months in particular reflect country -specific developments, mainly related to expectations of weakening geopolitical risks in the South Caucasus. In this context, the key uncertainty relates to whether current trends in emerging markets are driven by fundamental versus transitory factors. This, in turn, raises significant uncertainty regarding the long - term, stable level of Armenia’s country risk premium and the interpretation of the neutral rate. On the other hand, uncertainty surrounding the geopolitical and regional security environment has increased somewhat in recent months, posing risks of an upward adjustment in Armenia’s country risk premium. Considering the persistence of numerous types of uncertainty, the CBA builds and evaluates several different scenarios for future economic developments in order to manage possible risks stemming from these key areas of uncertainty. The key Case A scenarios (policy rate path above market expectations) relate to risks of higher global neutral rates, a potential acceleration of capital flows amid easing regional
geopolitical tensions, and risks of expanding aggregate demand conditions. The key Case B scenarios (policy rate path below market expectations) relate to uncertainty regarding the outlook for the global economy, a weak domestic demand environment, as well as risks of greater real exchange rate trend appreciation and a relatively lower level of Armenia’s neutral rate.