Georgian National Bank to intensify foreign exchange interventions
BAKU, Azerbaijan, May 9
By Tamilla Mammadova - Trend:
Against the backdrop of the coronavirus outbreak and the global oil crisis, Georgian national currency lari has depreciated against the USD in recent weeks, National Bank of Georgia (NBG) told Trend.
"The National Bank of Georgia will carry out foreign exchange interventions more actively this year. Past years’ efforts of accumulating reserves made it possible for the National Bank of Georgia to provide additional foreign exchange resources to the market through interventions given the current extraordinary circumstances and expected decline in private foreign exchange (FX) inflows," the bank said.
As the bank noted, the uncertainty regarding the coronavirus pandemic has increased significantly in recent months both at the international and regional levels.
"The main objective of the National Bank of Georgia is to maintain price stability in the country, i.e to keep the low rate of the inflation. Although the weakening of the external demand reduces the inflation, exchange rate depreciation has the opposite effect and increases inflationary risks," the NBG noted.
As the bank said, the ultimate impact on inflation, and thus the response of the National Bank, will depend on which factor outweighs the others.
"The Monetary Policy Committee (MPC) of the National Bank of Georgia met on April 29, 2020, and decided to cut the refinancing rate by 0.50 percentage points to 8.5 percent, given that in the medium term weak aggregate demand will put downward pressure on prices," the bank noted.
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