The National Bank of Georgia increases the policy rate by 25 basis points to 7.0 percent
02 May, 2017
The Monetary Policy Committee of the National Bank of Georgia met on May 2, 2017 and made the decision to increase the refinancing rate by 25 basis points to 7.0 percent.
The decision is based on the macroeconomic forecast, according to which, due to the supply side pressures, the inflation is expected to be above its target rate during 2017. Nevertheless, once the effect of one-time factors affecting CPI inflation is exhausted, the inflation rate is expected to decline at its target level in 2018. Moreover, by increasing the policy rate, the National Bank of Georgia intends to control the inflation expectations. Other things equal this year, a further increase in the policy rate is not expected. With the elimination of the impact of the aforementioned one-time factors, the inflation will start declining and will stay close to the target in the medium term; the policy rate in the medium term is expected to gradually decrease to its neutral level.
This year, the factors affecting the demand side of the consumer prices are still weak, although the economic activity has improved. According to preliminary estimates, economic growth in the first quarter is 5.0 percent. Following the economic recovery of the main trading partners, the external demand has surged, significantly increasing the revenues from tourism and exports. Moreover, compared to the previous year, the volume of remittances has grown.
The NBG will continue to monitor the developments in the economy and financial markets and will use all available instruments at its disposal to ensure the price stability.
The new monetary policy rate will be effective from 4th of May, 2017.
The next meeting of the Monetary Policy Committee will be held on June 14th, 2017.