Central Bank increases refinancing rate to 7.25% to deal with inflation

The National Bank of Georgia (NBG) has decided to increase its refinancing rate in response to expectations of increased inflation.

The Monetary Policy Committee (MPC) of the bank met today and decided to increase the refinancing rate by 25 basis points to 7.25 percent.

The NBG said the monetary policy decision was based on macroeconomic projections forecasting inflation in upcoming months – further changes to monetary policy will depend on actual inflation, factors affecting inflation and the general state of the economy.

Survey indicators for the last two months indicate a rise in inflation expectations, while the improvement of the economic activity by more than was expected is likely to reduce the possibility of a reduction in inflation. In order to reduce inflation in the mid-term period it was necessary to tighten the monetary policy. At this stage the refinancing rate will be increased by 25 basis points,” read the press release by the NBG.

The NBG forecasts inflation to start decreasing from the beginning of 2018 in Georgia.

Georgia’s annual inflation rate posted a 6.9 percent year-on-year increase, while in November 2017 the monthly inflation rate amounted to 1.1 percent, reports the National Statistics Office of Georgia (Geostat).

Meanwhile, Georgia experienced 4.9 percent economic growth in the first 10 months of 2017 and the estimated real gross domestic product (GDP) growth rate amounted to 5.7 percent year-on-year in October 2017.

The next meeting of the Monetary Policy Committee will be held on January 31, 2018.