Central Bank Increases Key Rate to 8%

The National Bank of Georgia (NBG) raised its key refinancing rate by 50 basis points to 8% and said that further increase is unlikely “in the coming period.”

The central bank started tightening of the monetary policy earlier this year, gradually increasing refinancing rate from 4% in February to current 8%.

“The tightening of the monetary policy by the National Bank of Georgia must have positive effect on the decrease in inflation expectations,” the NBG’s monetary policy committee said after a meeting on December 16.

“Unless other additional shocks take place, further monetary tightening in the coming periods is not to be expected,” it said.

Georgia’s annual inflation accelerated to 6.3% in November from 5.8% previous month, the highest rate since August 2011.

The central bank’s monetary policy committee said it expects annual inflation to gradual decrease and return to target level of 5% in the second half of 2016.

The monetary policy committee will hold its next meeting on February 3, 2016.