The Georgian central bank is leaving the refinancing rate unchanged at 10% following a meeting of the monetary policy committee, whose decisions on changes to the monetary policy rate rely on current and expected developments in the economy and financial markets.
When the economy is growing at a rate that may lead to increased inflation, the central bank of Georgia may increase interest rates.
Georgia’s annual inflation at 12.8% in August was also higher than expected. The driving forces of high inflation are still predominately one-off and independent from monetary policy. According to the preliminary estimates, the contribution of such exogenous factors to headline inflation is about nine percentage points”, said the NBG.
The NBG reported that various factors contributed to high inflation, such as:
- The sharply increased prices of food and oil in international markets since the beginning of the year
- The increasing dynamics of international shipping costs that are making imported products more expensive globally
- In August the growth of prices of imported products accelerated to 18.7% year-on-year, which is significantly higher than the increase in prices for domestic goods (8.2%)
- Increased growth rate of lending
The NBG said that the inflation is expected to remain high for the rest of the year.
Inflation will decline significantly from spring 2022, which, along with the fading-out of temporary factors, will be facilitated by tight monetary policy and fiscal consolidation”, said the NBG.
The next meeting of the monetary policy committee will be held on October 27, 2021.