The National Bank of Georgia (NBG) has increased the refinancing rate by 0.5 percentage points to 9 per cent.
The decision was made today, during the meeting of the Monetary Policy Committee.
According NBG, the annual inflation in November reached 7%, which was mainly influenced by the depreciation of GEL.
They started increasing the refinancing rate in September this year, which aims to decrease the pressure of the exchange rate on the inflation.
As of today, one dollar is worth of 2.9089 GEL, says the NBG.
Despite the current strengthening of GEL, the exchange rate is still depreciated which promotes inflationary expectations higher than the target inflation. Target inflation was defined at three per cent by the NBG.
According to the NBG’s forecast, inflation will start to decline beginning in March of next year, and will be close to target inflation by the end of 2020.
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 January 29, 2020.