The National Bank of Georgia (NBG) has increased the refinancing rate by 0.5 percentage points to 7.5 per cent.
The decision was made at a special meeting of the Monetary Policy Committee yesterday.
The depreciation of the exchange rate has boosted inflationary expectations, the NBG said on September 4, 2019. Therefore the refinancing rate was increased at the time by 0.5 percentage to 7 per cent, 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 per cent in Georgia, which is more than the inflation target of three per cent set by the National Bank of Georgia for 2019-2021.
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 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 October 23, 2019.