Galt & Taggart economist Lasha Kavtaradze considers, that the National Bank of Georgia will make a decision on increasing the refinancing rate tomorrow. In his estimation, the increase may even amount to 1 percentage point.
Accordingly, Galt & Taggart forecasts that the refinancing rate could reach 12% tomorrow.
"The NBG's signal that the National Bank is controlling inflation is important. Although much of the inflation is caused not by demand but by supply, we think the National Bank will have to raise its refinancing rate tomorrow. This can be up to one percentage point.
The inflation forecast that we have - 10.5%, provides a certain tightening of the policy by the National Bank," said Lasha Kavtaradze.
The economist noted that the responsibility for reducing inflation in the country lies with the National Bank and the government. Lasha Kavtaradze believes that it would be right if the government reduces the level of budget deficit this year.
"Monetary policy alone cannot alleviate the inflationary pressure we have. Fiscal policy is also important. The fiscal deficit from 2020 onwards is very high and it changes a lot in macroeconomics.
This year, in order to alleviate the pressure, it is necessary to reduce the budget deficit. This will also give a positive opportunity.
If we want inflation to be more or less subdued, fiscal and monetary policies must go in the same direction. No fiscal-monetary policy can guarantee that inflation will return to 3% by the end of the year, but here it is important to see a downward trend," Lasha Kavtaradze said.
The Monetary Policy Committee of the National Bank of Georgia will hold a meeting on May 11. On March 30, the NBG increased the refinancing rate by 0.5 percentage points to 11%, which is an unprecedentedly high rate.
