The Monetary Policy Committee of the National Bank of Georgia made a decision to keep the refinancing rate at the current level.
According to the information, provided by the National Bank, the increase of inflation value, recorded in the second quarter, is compliant with current forecasts, according to which, under the influence of one-time factors from the supply side, this year, inflation level will be above the targeted values. In June, annual change of consumer price index was 7.1%, of which contribution of tobacco products and fuel is 2.6 percent points. Such an increase of the inflation rate is temporary; according to the forecast, it is expected that inflation rate will start to drop as from the second half of the year and, with the expiration of the influence of one-time factors, will approach the target values early next year. Taking the above into consideration, no need for additional tightening of the policy is obvious. In case of additional shocks, reduction of monetary policy rates to the neutral level is possible in the mid-term.
“In the first half of 2017, economic growth indicators point to the higher growth than expected. Particularly notable is the improvement of foreign sector, which is translated into the high pace of growth of export of goods and services (tourism) and money transfers. Together with the increase of foreign inflow, consumption increases as well, which also facilitates economic growth. Despite the above, internal demand and the entire economic activity is still on the level lower than potential and, accordingly, doesn’t create any risks of pressurizing inflation from the demand side.
Increase of crediting of economy from the part of the banks is within about 15%, which is in compliance with the current macroeconomic forecasts. Credit portfolio increases mainly due to the loans issued in national currency, which allows for approaching the targeted level of inflation through moderate change to the policy rates.
National Bank of Georgia will keep on observing current economic processes and financial markets and will use all the means and sources on hand to ensure stability of the prices”, – they say in NBG.
Next session of the Monetary Policy Committee is scheduled for September 6, 2017.