NBG: Georgia’s refinancing rate drops 25 basis points to 6.5%

Georgia is continuing to move away from its tightened monetary policy set by the National Bank of Georgia (NBG) in February 2014 – the time when the national currency (Lari/GEL) started to fall against the United States (US) dollar and the Euro.

Following today’s advice from the Monetary Policy Committee (MPC), NBG decreased its refinancing rate by 25 basis points. With this change the Bank’s refinancing rate now stands at 6.5 percent.

The decision to reduce the refinancing rate came after experts took a thorough look into the country’s macro-economic forecast. Banking experts said the phasing out of the tight monetary policy must continue in order for inflation to reach its target value.

According to the current forecast, unless other factors affecting the economy occur, the monetary policy rate will be around six percent in the mid-term period. … Inflation will remain low in the coming quarters and will reach its target by the end of 2017,” said NBG.

Improvement in aggregate demand and, as a result, inflation closing on its target, is supported by both the phasing out of the tight monetary policy and fiscal stimulus,” said the Bank today.

As a result of a lower refinancing rate, people with loans in foreign currencies will have less to pay when repaying their loans

Starting from tomorrow 1 USD will cost 2.30 GEL, while 1 EUR will cost 2.59 GEL. In local exchange booths the rate was expected to be much higher.

NBG will continue to monitor changes in the economy and financial markets and will use all means and instruments at its disposal to ensure the Lari remains stable.

The next meeting of the Monetary Policy Committee will be held on October 26, 2016.