National Bank Raises Monetary Policy Rate by 25 Base Suggest 6.75%

National Bank Raises Monetary Policy Rate by 25 Base Suggest 6.75% August 25, 2018Leave a comment

On January 25 Monetary Policy Committee of National Bank of Georgia (NBG) increased refinancing rate by 25 base point to 6.75%.

The decision will depend on macroeconomic forecasts, to which in 2017 inflation shall be mainly over the target indicator. However, in 2018 inflation will decline and is maintained underneath the target indicator.

Under the forecast, temporary increase inflation is usually preconditioned by one-time factor, especially by development in excise on consumer prices and influence of exchange rate volatility. Concurrently, exchange rate dynamics was mainly preconditioned by Turkish LIRA depreciation and USD global strengthening ever since the lover of 2016, given that the mentioned factors have intensified inflation expectations. Using the existing forecasts, NBG finds its reasonable to gradually raise monetary policy rate to 7% using the try and curb the mentioned expectations. At this point, the protection rate spent their childhood years by 25 base point. After finishing one-tine effects, inflation will decline along with midterm period it is going to move even closer target indicator.

In all the other equal conditions, in addition to finishing factors affecting inflation, in midterm period monetary policy rate will revisit its neutral level stage by stage.

At this stage, inflation will be maintained at low level because of weak joint demand, reduced imports inflation and finishing of base effect. In December 2016 annual inflation marked 1.8%.

Positive tendencies were outlined when it comes to exports. In fourth quarter of 2016, on account of improved external demand, annual declination in exports of registered good was replaced by upturn. However, imports also increased and this factor deteriorated net exports.

Revenues from tourism sector is additionally growing. Moreover, money transfers from abroad have also increased when compared with 2015.

NBG will supervise over ongoing economic developments and finance markets and often will apply all leverages to hold consumer prices.

Next meeting of monetary policy committee will likely be held on March 7, 2017.

Leave a Reply

Your email address will not be published. Required fields are marked *