Central Bank Keeps Key Rate at 7%

The key refinancing rate will remain unchanged at 7%, the National Bank of Georgia (NBG) said in its statement on July 26.

According to the NBG, in the second quarter of 2017, “the hike of inflation is in line with existing forecasts,” according to which, “due to one-off supply side pressures, the inflation will remain above the target rate for the current year.”

“In June, the annual inflation rate has increased, reaching 7.1%,” the regulator said, adding that the price increase on Tobacco products and fuel has accounted for 2.6 percentage points increase.

The NBG however, added that the inflation rate increase “is temporary,” and that it “will experience decline in the second half of 2017, and due to the expiration of one-off factors, will get close to its target rate at the beginning of next year.”

“Therefore, there is no need for any further tightening of the monetary policy. In the absence of additional shocks, it is expected that the key rate will gradually return to its neutral level in the medium term,” the National Bank said.

“The National Bank of Georgia will monitor the developments in the economy and financial markets and will use all available instruments at its disposal to ensure the price stability,” the regulator added.

The NBG started tightening its monetary policy from February 2015 pushing the key refinancing rate from 4% in February up to 8% by the end of the year. The rate remained unchanged at 8% in the first three months of 2016 but went through gradual easing beginning from April and remained unchanged at 6.5% until January, 2017. The National Bank of Georgia increased the key rate to 6.75% on January 25 and to 7% on May 2.

The next meeting of the NBG’s monetary policy committee has been scheduled for September 6, 2017. (civil.ge)