07.Nov .2019 12:38

What steps the National Bank took to reduce inflation - Gvenetadze's answer

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According to Koba Gvenetadze, the President of the National Bank of Georgia, the NBG uses all the levers to manage inflation, including the monetary policy rate. All these levers should reduce inflation through various channels.

In addition, the president of the National Bank says that decline of minimum reserve requirement by 5% in foreign currency has been a taken step to reduce inflation.

“Inflation is a central mandate of the National Bank and it is always the concern of the NBG. As for the current situation, the National Bank consistently takes steps to prevent long-term inflation and stabilize it. Monetary policy has tightened during last 3 meetings of Monetary Policy Committee and interest rate has risen by 200 basis points, which should have an impact on the inflation through a variety of channels.

One channel is to reduce demand on aloans in national currency.

The most recent annual inflation rate is 6.9%, while the core inflation - 3.4%. Why does it matter? Core inflation usually shows the direction of inflation dynamics; it is not far from the inflation target.

Reserve requirements were also reduced along with the tightening of monetary policy and that was another step towards reducing the inflationary pressure on the depreciated GEL,” Koba Gvenetadze said.

To remind, annual inflation stood at 6.9% in October, exceeding the National Bank's target -3%. However, the IMF revised the inflation forecast in Georgia and increased it from 5.4% to 7.2% this year.