The key refinancing rate will remain unchanged at 7%, the National Bank of Georgia (NBG) said in its statement on September 6.
According to NBG, “the inflation dynamics (5.7% in August) is in line with existing forecasts,” according to which, “the inflation will remain above the target until the end of the year, and in the beginning of 2018, once temporary factors expire, the inflation will get close to the 3% level.”
The National Bank added that the inflation expectations are stable and that it expects the key rate to gradually decrease to its neutral level in the medium term “in the absence of additional shocks.”
NBG also said that the “developments in the external demand are still positive.” “Both the export of goods and tourism revenues have been growing at a high rate, the volume of remittances has been rising as well.”
“At the same time, the growth in imports has been moderate,” the regulator went on. “According to preliminary estimates, the economic growth in the first seven months of 2017 was 4.4%,” which “is still below the potential level, and therefore, there are no inflationary risks from the demand side.”
The National Bank touched upon the “larization” process as well, saying the overall growth in credits this year was due to the increase of loans in Lari, the national currency. “Lari deposits have been growing as well,” it said, adding that the increase of “larization” reduces the effect of currency fluctuations on the disposable income and fosters medium-term macroeconomic stability.
“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.
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 Bank kept the rate unchanged at its two previous meetings, on June 14 and on July 26.
The next meeting of NBG’s monetary policy committee has been scheduled for October 25, 2017.