A decision to raise Georgia’s refinancing rate could be considered at upcoming meetings of the National Bank of Georgia’s Monetary Policy Committee, said Davit Utiashvili, head of the NBG’s Financial Stability Department. He said uncertainty remains high as current inflationary pressure is largely driven by external factors beyond the central bank’s control.
Utiashvili noted that the NBG had already tightened monetary policy, raising the refinancing rate by 0.25 percentage points in late spring. The central bank is now monitoring so-called second-round effects and inflation expectations, particularly whether higher oil prices lead to broader increases in transport, agricultural products and other goods and services.
“Until now, we have not seen significant secondary effects or a substantial increase in inflation expectations. However, these risks increase over time and, all else being equal, such decisions may become necessary at upcoming committee meetings,” Utiashvili said.
He added that uncertainty over oil prices was one reason the NBG did not take another step at its latest meeting. “If the price of oil falls by $20 next month, this could, on the contrary, give us much more room to reduce rates in the future,” Utiashvili said. On September 8, the NBG kept the refinancing rate unchanged at 8.25%, saying the recent rise in inflation was mainly driven by higher fuel prices and other external factors.
