The Committee discussed the Draft Main Directions of the Monetary and Exchange Rate Policies for 2024-2026 introduced by the National Bank. The Draft was submitted by the acting President of the NB, Natia Turnava as stipulated under the law.
The document provides the inflation target, the main monetary policy instruments that are used by the NBG when conducting monetary and exchange rate policies and overviews the macroeconomic milieu and risks. As the reporter noted, the key task of the NB is to ensure price stability in the country, as well as the stability and transparency of the financial system and the facilitation of sustainable economic growth without prejudice to the fulfillment of the key assignments.
As she noted, simultaneously with the mitigation of inflation risks, the monetary policy rate keeps to be gradually reducing. The NB takes into account the basic scenario-related risks and keeps a consistent reduction of the policy rate. As a result, the rate will approximate its neutral level – 7%. The reporter dwelt on the importance of the achievement of the maximally approximated, short-term interest rate with the monetary policy rate, stating that the intensity of the transition of the monetary policy to the real economy requires the reflection of the change of the monetary policy rate on the market interest rates.
“Deriving from a low inflation rate in 2023, and as we expect, its approximation with a target 3%, it is no longer necessary to subdue the credit activities through additional instruments under equal conditions. It is as well noteworthy that the correlation of the credit activity with GDP is lower than the trend; that’s why, the validity of the consumer loans was extended up to 4 years”.
As the reporter added, the monetary and exchange rate policy ensures price stability within the average term, which will intensify sustainability of the economy towards the potential shocks and facilitate the stable and enduring economic growth. Low inflation is a result of reduced inflation expectations and local inflation decline against the background of strict monetary policy and as NB forecasts, the inflation rate will be maintained below 3% in 2023. Ultimately, the inflation will be maintained around 3% in the average term.
The reporter touched upon the completion of the currency reserves and noted that against the background of the recently increased money inflow, the NB intensifies the fill-up of the international currency reserves. According to her, providing intervention, international reserves are increased to about 1,292 bl. USD, which is a historical maximum. As she stated, the introduced monetary and exchange rate policy ensures the price stability, increases sustainability of economy towards the potential shocks and facilitates stable and enduring economic growth.
The Committee endorsed the document.