BAKU, Azerbaijan, March 18
By Tamilla Mammadova – Trend:
The Monetary Policy Committee (MPC) of the National Bank of Georgia (NBG) held a meeting on March 18, 2020, and decided to keep the refinancing rate unchanged at 9 percent, Trend reports referring to the NBG.
"In January-February, annual inflation stood at 6.4 percent. According to the forecasts available at the previous Monetary Policy Committee meeting, inflation was expected to decline over the rest of the year and approach the target gradually, while the decline in inflation was ensured by the tight monetary policy stance," said NBG.
According to the bank, amid the coronavirus pandemic and the sharp drop in oil prices on the international commodity markets, economic uncertainty significantly increased globally.
"It is expected that economic growth rates will slow down for our trading partners as well as in Georgia, but at this stage it is impossible to make accurate estimates based on the available data," said the NBG.
As reported, the volatility of foreign exchange (FX) markets in Georgia as well as in other countries of the region is high and the depreciation of the nominal effective exchange rate will exert the upward pressure on inflation expectations.
According to NBG, the weak external demand reduces the domestic demand significantly, which will have a downward pressure on inflation. In the medium term, the inflation dynamics will be determined by the interaction of these two factors. If the pressure on inflation from the nominal effective exchange rate turns out to be stronger, NBG will consider the tightening of monetary policy stance.
"While, if the decline in external and domestic demand will be so strong and long-lasting that, despite the depreciation of the currency, it will create a downward pressure on inflation, NBG will start to ease monetary policy stance. Hence, considering high level of uncertainty, the Monetary Policy Committee deemed it appropriate to leave the interest rate unchanged at this stage and to maintain a tight monetary policy," said the bank.
As reported, NBG continues to actively monitor the developments in the economy and along with the release of new data that will allow us to better assess the situation, the NBG will use all available tools to ensure price stability.
The next meeting of the Monetary Policy Committee is scheduled for April 29, 2020.
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