Georgia’s central bank purchases $15 mln at foreign exchange auction

The National Bank of Georgia (NBG) has purchased $15 million at foreign exchange auction to control the national currency’s changing value against the US dollar.

The weighted average exchange rate was 2.6497 GEL for every 1 USD.

Today 1 USD equaled 2.6506 GEL, while 1 EUR cost 3.0270. From tomorrow, 1 EUR will cost 3.0187 GEL.

So far in 2019 the NBG has purchased $100 million at foreign exchange auction, while in 2018 the NBG purchased $197 million in total.

The NBG also released its ‘Monetary Policy Report, February 2019’, in which governor of the NBG Koba Gvenetadze reviewed the recent decisions of the bank and shared forecasts.

Gvenetadze mentioned that in the recent period the NBG was maintaining a moderately tight monetary policy to neutralise the inflationary risks. Recently, the NBG decreased its refinancing rate by 25 basis points and now it stands at 6.75%.

However, based on the current macroeconomic forecast, following the decline of inflation to its target level of 3% and remaining close to it, in the medium term the monetary policy rate is expected to decline gradually to its neutral level. This marks the continuation of monetary policy normalisation which started in August last year”, said Gvenetadze.

NBG explains that changes to the monetary policy rate rely on the current and expected developments in the economy and financial markets. While formulating the monetary policy the MPC takes into account the projected inflation rate.

In the fourth quarter of 2018, annual inflation stood slightly lower than expected at 1.9%. This was mainly a consequence of the weak aggregate demand and partly, faster-than-expected reduction of oil prices on international markets”, said Gvenetadze.

These, in turn, outweighed the upward pressures from recent price increase in bread and cereals. As a result, annual inflation rate in December decreased down to 1.5%, but in January 2019 it recovered somewhat and stood at 2.2%. Despite this variation, inflation is still close to the NBG’s target of 3%”, he added.

According to the NBG’s forecast, inflation will vary around the target level of 3% in the medium term.

As for the gross domestic product (GDP) the NBG’s forecast of real GDP growth for 2019 remains the same at 5%.