Central Bank Hikes Key Rate to 11%

The Monetary Policy Committee of the National Bank of Georgia (NBG) today hiked the key refinancing rate by 50 basis points to 11%, at a new 14-year high.

The policy-setting committee decided to further tighten Georgia’s monetary stance amid intensified inflation risks, the central bank said in a statement.

It stressed that “Russia’s invasion in Ukraine and the resulting full-scale war have posed new challenges to the world economy that was still in the phase of post-pandemic recovery.”

Particularly, the central bank highlighted that the new economic shock has resulted in sharp rises in oil and fuel prices, expected to have a significant impact on inflation.

Besides, the sanctions against Russia as well as supply-side disruptions "have significantly increased the prices of a number of product categories on the world markets," the NBG said.

The central bank also took note of increased volatility in foreign exchange markets amid rising risks of reduced external inflows of currency.

Due to these factors, the central bank said it expects Georgia's high inflation rate to decline less than predicted earlier.

According to the NBG's forecasting, the annual rate of inflation will remain above the 3% target throughout the rest of 2022.

The central bank also asserted it will likely maintain a tightening policy until the "rising inflation expectations are sufficiently mitigated."

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