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National Bank increases refinancing rate up to 7.5%

By Tea Mariamidze
Friday, November 6
A Non-governmental Organization (NGO) - Society and the Banks - claim that 8587 people will see an increased interest rate on their loans.

The organization released a statement saying that the National Bank of Georgia (NBG) has increased the refinancing rate again up to 7.5%.

For now, the rate of monetary policy is 7.5%, which was 4% at the beginning of the year and increased up to 4.5% in February, later increased to 5% in May, to 5.5% in July, to 6% in August and to 7% in September.

“The increase of the refinancing rate will reduce lending in the economy and the price level. This will cause the exchange rate of the Lari to strengthen. However, the reduction of the national currency will have a negative impact on economic growth,” the statement reads.

The Monetary Policy Committee (MPC) of the NBG held a meeting on November 4 and decided to increase the refinancing rate by 50 basis points to 7.5 % percent.

According to the NBG, the monetary policy decision is based on the macroeconomic forecast, according to which the National Bank continues the monetary policy tightening in response to increased inflation expectations.

The NBG has released a statement saying that the main factors causing inflation are the exchange rate's depreciation and higher prices on certain imported goods, as well as the increase in the electricity tariff.

“Inflation is expected to remain above the central bank’s target level in the beginning of 2016, then it will start lowering and reach a 5% target level in the second half of 2016,” the statement of the NBG reads.

It should be noted that the National Bank opened its reserves and sold USD 20 million on the foreign exchange market on October 27 in order to strengthen the GEL. It was Georgian central bank’s seventh intervention this year, with total sales of US dollars reaching 246.96 million.

The next meeting of the Monetary Policy Committee will be held on December 16, 2015.