The Monetary Policy Committee (MPC) of the National Bank of Georgia (NBG) held an extraordinary meeting on September 25, 2019 and decided to raise the refinancing rate by 0.5 percentage points to 7.5 percent.
At the previous meeting of the Monetary Policy Committee, the National Bank of Georgia started tightening monetary policy aiming at neutralizing inflationary pressures stemming from the exchange rate depreciation. As stated in the committee's decision from September 4, policy tightening was expected to continue until the pressure on the exchange rate was eliminated. Moreover, in the same decision the Committee also referred to the possibility of holding an extraordinary session if necessary.
Since the last committee meeting, the nominal effective exchange rate of the GEL has remained undervalued and inflationary expectations persist. Hence, at today's extraordinary meeting, the Monetary Policy Committee decided to increase the refinancing rate by 0.5 percentage points. The NBG will continue to monitor the developments in the economy and financial markets and will use all means and instruments at its disposal to ensure the price stability.
The data from the external sector reveal the positive dynamics. Specifically, the balance of trade in goods and services continued to improve in August, which, in addition to the tighter monetary policy stance, promotes the strengthening of the exchange rate through expectations channel and, as a result, should provide the desired dynamics of inflation over the medium term.
The next meeting of the Monetary Policy Committee is scheduled on October 23, 2019.
Source - NBG
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