Georgian central bank leaves monetary policy rate unchanged at 9.5%
When the economy is growing at a rate that may lead to increased inflation, the central bank of Georgia may increase interest rates. In May annual inflation stood at 7.7%. Photo: Nino Alavidze/Agenda.ge.
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The Georgian central bank is leaving the refinancing rate unchanged at 9.5% following a meeting of the monetary policy committee, whose decisions on changes to the monetary policy rate rely on current and expected developments in the economy and financial markets.
When the economy is growing at a rate that may lead to increased inflation, the central bank of Georgia may increase interest rates. In May annual inflation stood at 7.7%.
NBG said that the contribution from imported food prices to the inflation rate is still high due to rising prices on international agricultural markets and the exchange rate depreciation in previous periods.
At the same time, rising global oil prices are pushing fuel prices higher and, consequently, increasing their contribution to inflation. In addition, amid rising natural gas tariffs in Tbilisi, the impact of utility fees on the inflation rate is expected to increase further starting from June. The base effect of the previous utility fees' subsidy will temporarily increase the annual inflation in December 2021 and January-February 2022", said the NBG.
Economic activity meanwhile increased 8.1% year-on-year in the first four months of the year and exceeded the 2019 level. Imports have grown, external inflows have increased, 'contributing to the positive dynamics on the foreign exchange market and, supporting the reduction of inflation'.
Annual inflation is expected to peak in June, while in 2021, other things being equal, it will average 7%. Maintaining tight monetary policy for a prolonged period and the expected fade-out of one-off exogenous factors that are independent from the monetary policy will support the gradual return of inflation to the target in 2022. Taking into account these factors, the committee decided to leave the monetary policy rate unchanged", said the NBG.
The next meeting of the monetary policy committee will be held on August 4, 2021.