G&T economist Lasha Kavtaradze expects the National Bank of Georgia (NBG) to keep its refinancing rate unchanged at 8.25% at the Monetary Policy Committee meeting scheduled for October 21. However, he said a rate increase remains possible, while the central bank may also leave rates unchanged for the rest of the year.
Speaking on TV-program Business Morning, Kavtaradze said domestic inflation indicators, including core, services and local inflation, have not deteriorated. However, the US Federal Reserve’s rate increases could prompt some NBG committee members to support tighter monetary policy to preserve the interest-rate differential between the lari and the US dollar and maintain the attractiveness of lari-denominated investments.
Kavtaradze added that the NBG may ultimately decide against tightening monetary policy this year. Even if the Federal Reserve raises rates while Georgia’s rate remains unchanged, the interest-rate differential would still be around four percentage points.
He also pointed to strong international reserves and continued reserve accumulation as factors supporting this possibility. Georgia’s reserves could reach $9 billion by year-end, he said, adding that expectations of lari appreciation over the medium term could further reduce the need for monetary tightening.
