The National Bank of Georgia keeps its policy rate unchanged at 6.50%

The National Bank of Georgia keeps its policy rate unchanged at 6.50%

12 June, 2019
The Monetary Policy Committee (MPC) of the National Bank of Georgia (NBG) met on June 12, 2019 and decided to keep the refinancing rate unchanged at 6.50 percent.

In May, with a significant contribution from one-off factors, annual inflation rate equalled 4.7 percent. The contribution of the increased excise tax on tobacco on the annual inflation was 1.3 percentage points. Also, the growth of oil prices on international markets at the beginning of the year contributed to the annual inflation. It should be noted that the core inflation, which excludes food, energy and tobacco, stands at 1.1 percent, indicating that the increase in inflation is only temporary. According to the current forecast, other things equal, the inflation will move towards the target level once the one-off factors fade away from the beginning of the next year. It is important to note that aggregate demand remains below the potential, hence, the demand side pressure on inflation is weak. The monetary policy committee is taking into account the risks of rising inflation expectations and, therefore, further monetary policy normalization process will continue slowly. At a current stage, the MPC deemed appropriate to keep the policy rate unchanged. 

Although preliminary data indicates increased economic growth, the demand side pressure to the inflation remains weak. The growth of credit activity remains moderate (in April, excluding the exchange rate effect, it equalled 13%). From early 2019, the growth of consumer loans and mortgages in foreign currency declined; however, at the same time, business loans continue to grow and mortgages in national are more active.

The competitive exchange rate supports the improvement of the current account balance.The preliminary data indicates the high growth of export of goods and services. Growth of remittances is also significant.

According to the same indicators, the growth rate of imports reveals a declining trend in the first few months. The improvement in current account deficit positively affects investors sentiments, reducing the risks associated with the external sector. 

The NBG will continue to monitor the developments in the economy and financial markets and will use all means and instruments at its disposal in order to ensure the price stability. 

The next meeting of the Monetary Policy Committee will be held on July 24, 2019.