National bank keeps refinancing rate unchanged at 10.5%
“In the face of strong supply shocks, persistently high inflation does not raise long-term inflation expectations. At the same time, risks are apparent in terms of both geopolitical tensions, as well as faster-than-expected tightening of global financial conditions,” the NBG noted. Photo: Nino Alavidze/Agenda.ge.
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The National Bank of Georgia (NBG) has decided to keep the refinancing rate unchanged at 10.5 percent at a meeting of the Monetary Policy Committee (MPC) earlier today.
A “particular concern” for increased inflation was named by the bank in its comments, with the Consumer Price Index growing by 0.3 percent in December 2021 and the annual inflation rate amounting to 13.9 percent in the country.
The base effect of the 2020 subsidy on utility bills was the main driver for this increase since the month before [November],” the bank said.
The NBG further said the high inflation rate would continue to persist in January and February, before beginning to decline gradually starting in the spring.
The statement also mentioned a surge in consumer commodity prices on international markets, transmitted to the local market through imported raw materials and finished goods, as one of the key factors contributing to the increased inflation.
However, it also noted “the recent strengthening of the nominal effective Georgian Lari exchange rate has somewhat eased the pressure from international markets.” The MPC had decided to “maintain tight monetary policy” until “the risks of rising inflation expectations are sufficiently mitigated”, the comments also said.
In the face of strong supply shocks, persistently high inflation does not raise long-term inflation expectations. At the same time, risks are apparent in terms of both geopolitical tensions, as well as faster-than-expected tightening of global financial conditions,” the NBG noted.
The non-governmental organisation Society and Banks said 185,300 loans tied to floating interest rates remained active as of January 1, which meant the prices of these loans could grow as well, due to an increased refinancing rate. The total volume of loans issued that are tied to floating interest rates amounts to 8.69 million GEL, the NGO added.
The next meeting of the MPC will be held on March 30.
The Consumer Price Index in December 2021 grew by 0.3% compared to the previous month, while the annual inflation rate in Georgia stood at 13.9%, the latest inflation data of the National Statistics Office of Georgia (Geostat) show.
The National Bank of Georgia (NBG) has increased the refinancing rate by 0.5 percentage points to 10.5% earlier today at the Monetary Policy Committee (MPC). The NBG states that increased inflation has been one of the main challenges for Georgia in recent years.
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