Monetary Policy Committee (MPC) of the National Bank on September 23, 2015, decided to increase the refinancing rate from 6% to 7%.
A statement released by the National Bank reads that the decision was based on a macroeconomic evaluation showing that inflation expectations increased sharply against the background of the devaluation of the lari exchange rate against the dollar.
“In August, the annual growth of consumer prices amounted to 5,4%. According to the current forecast, after a temporary deviation from the target, the inflation rate for the end of 2015 will go down to the projected level,” it is said in the statement.
The National Bank also stressed that the devaluation of lari led to an increase in intermediate costs and a rise in prices of the imported goods.
“The rate of inflation was greatly influenced by the growth in electricity tariffs. Rising inflation limits the drop in world prices for oil and food. A difficult economic situation in the region impedes the economic growth which also had a negative impact on exports from Georgia, as well as the inflow of remittances from abroad. With regard to the positive trends, they are expressed in the fact that the impact of the imbalance on the exchange rate is exhausted and import adjustment, which declined 20%, respectively, the pressure on the national currency has reduced,” the National Bank’s a statement reads.
The reason that prompted the National Bank to increase the refinancing rate was the desire to deflate the negative expectations.
“In order for the negative expectations not to turn into inflation, the National Bank uses all available tools,” the Bank’s statement reads.