The National Bank of Georgia (NBG) kept its key refinancing rate unchanged at 6.5% on December 14.
“Due to the transmission of external shocks and the scheduled increase of excise taxes, one-off increase of prices is expected, but under the decrease of inflation expectations, this factor will have a short-term effect on inflation rates. Based on the above, the National Bank deems it reasonable to keep the key rate unchanged,” the bank’s monetary policy committee said after a meeting on December 14.
Georgia’s annual inflation stood at 0.2% in November, far below the regulator’s 2016 target of 5%. The National Bank cited “weak aggregate demand along with reduced prices on commodities on international markets” as one of the main reasons behind the low inflation rate.
NBG started tightening its monetary policy from February 2015 pushing the key refinancing rate from 4% in February up to 8% by the end of the year. The rate remained unchanged at 8% in the first three months of 2016 but went through gradual easing beginning from April and was set at its current level in September, 2016.
The regulator added that it would take into account “the dynamics of factors that define the inflation expectations” in making future decisions on the key refinancing rate.
The next meeting of NBG’s monetary policy committee has been scheduled for January 25, 2017.