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National Bank of Georgia may increase refinancing rate

Finance Materials 20 November 2019 16:39
National Bank of Georgia may increase refinancing rate

BAKU, Azerbaijan, November 20

By Tamilla Mammadova – Trend

A further increase in the refinancing rate is expected in Georgia, said President of National Bank of Georgia Koba Gvenetadze, Trend reports with reference to the National Bank of Georgia (NBG).

He made the remark at a session of the Budget and Finance Committee of Parliament. Gvenetadze spoke about the macroeconomic environment of Georgia, inflation and economic forecasts.

“Refinancing rate will increase until the forecast will show that the pressure of the nominal exchange rate on the inflation has been neutralized. After that, the refinancing rate will be decreased gradually and return to the neutral level, which is estimated at six percent,” said Gvenetadze.

He noted that for 2020-2022, the target inflation is defined at the level of three percent.

The National Bank of Georgia influences the level of inflation by steering interest rates. Specifically, the change in short-term rates is transmitted to long-term rates, which, ultimately, affects the interest rates on loans.

When projected inflation is above the target inflation rate, NBG raises the refinancing rate to combat a future surge in the general price level.

In October 2019, the annual rate of inflation amounted to 6.9 percent, which is more than the target inflation of three percent.

On September 25, the National Bank of Georgia increased the refinancing rate by 0.5 percentage points to 7.5 percent. On October 23, the bank increased the refinancing rate again by one percentage point to 8.5 percent.

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