Central Bank Holds Key Rate at 10%

The Monetary Policy Committee of the National Bank of Georgia (NBG) today kept the key refinancing rate unchanged at 10% for the second time, after raising it by 0.5% at its 13-year highest in August.

The central bank stressed it is keeping the monetary policy stance tight, as increased inflation remains a challenge for Georgia. Noting that consumer prices increased by 12.3% in September, the NBG said it expects inflation to remain high through February 2022.

According to the central bank, high inflation is mainly a result of one-off factors, such as significant increases in prices of food and oil on international markets. The NBG said the upward pressure on prices is also driven by the rapid growth of international transportation costs as well.

The policy-setting committee also took into account pent-up demand and a high growth rate of lending. Strong credit activity, albeit boosting the economy, hinders the reduction of inflation, the NBG stated.

The central bank nonetheless took note of positive developments, including a 24% annual increase in exports in January-September 2021 – 9% percent higher than the same period of 2019. It also cited a 22% growth in imports, against the backdrop of increased domestic demand in the country.

The Monetary Policy Committee convenes again on December 8.

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