Central Bank Raises Key Rate to 10.5%, 13-year Highest

The Monetary Policy Committee of the National Bank of Georgia (NBG) raised the key refinancing rate by 50 basis points to 10.5% today, at a new 13-year high, citing “particularly concerning” high inflation.

The central bank said it will have to keep its monetary policy tight until inflation declines, which it expects to happen in spring 2022. In the meantime, the National Bank said it forecasts the annual inflation rate to increase throughout December-February.

According to the NBG, the high inflation rate is mainly driven by exogenous factors, including increased commodity prices on international markets, which leads to higher imported inflation in Georgia.

However, the central bank cited as another factor the increased aggregate demand, due to rebounded domestic demand, significant government stimulus and accelerated lending growth. While the stronger demand helps in economic recovery, it makes reducing inflation more difficult, according to the NBG.

The NBG also touched upon positive trends, noting that external demand continues to grow as Georgia saw a 25% rise in exports during January-October and an almost 100% increase in revenues from international travelers.

The central bank’s policy-setting committee convenes next on February 2. 2022.

Also Read:

This post is also available in: ქართული (Georgian) Русский (Russian)