The National Bank of Georgia (NBG) has increased the refinancing rate by one percentage point to 8.5%. The decision was made at a meeting of the Monetary Policy Committee.
In September 2019 the annual rate of inflation amounted to 6.4%, which is more than the inflation target of three per cent, set by the National Bank of Georgia for 2019-2021.
The National Bank of Georgia (NBG) increased the refinancing rate by 0.5 percentage points to 7.5% on September 25.
The depreciation of the exchange rate has boosted inflationary expectations, the NBG said on September 4, 2019. Therefore, they increased the refinancing rate at the time by 0.5% to 7%, noting that it would continue to do so until the pressure of the exchange rate on inflation had decreased.
In August 2019 annual inflation amounted to 4.9% in Georgia.
According to the NBG’s forecast, inflation will remain above the target level this year but will start to decline beginning in March of next year, and stay close to the target in the medium-term, the NBG said.
By steering interest rates, the NBG influences the level of inflation. Specifically, the change in short-term rates is transmitted to long-term rates, which, ultimately, affects the interest rates on loans.
When projected inflation is above the target inflation rate, the NBG raises the refinancing rate to combat a future surge in the general price level.
The next meeting of the NBG’s Monetary Policy Committee is scheduled for December 11, 2019.