The Monetary Policy Committee (MPC) of the National Bank of Georgia (NBG) met on December 11, 2019, and decided to raise the refinancing rate by 0.5 percentage points to 9.0 percent.

In November, the annual inflation rate stood at 7.0 percent. Along with one-off factors, the inflation overshooting was caused by the nominal exchange rate depreciation. From September, the NBG started to tighten monetary policy aiming at neutralizing inflationary pressures stemming from the exchange rate depreciation. Despite the appreciation observed during the last few days, the GEL nominal effective exchange rate remains undervalued, pinning inflation expectations above the target level. As it was stated in previous decisions of the Committee, in order to maintain inflation close to the target level in the medium term, the policy tightening would continue until the pressure from exchange rate is receded. Therefore, the MPC increased the refinancing rate by 0.5 percentage points.

According to the forecast, other things equal the inflation will start declining from March 2020 and approach the target by the end of the year. The future decisions of the Committee will depend upon the speed of neutralization of inflationary pressure stemming from the exchange rate depreciation.

Moderate growth rate of export and money transfers is retained. After the decline in the previous months, tourism revenues increased in October and November in annual terms. Moreover, the FDI inflows grew as well in the third quarter. Against described external developments and robust credit growth,  the preliminary estimates indicate high economic activity.

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

The next meeting of the Monetary Policy Committee is scheduled on January 29, 2020.