Georgia’s central bank kept its key refinancing rate unchanged at 6.5% on Wednesday.
“According to the macroeconomic forecasts, weak aggregate demand and lower inflation expectations indicate the need of cutting key refinancing rate to a neutral level. But reduction of the key rate in a previous period has not been fully reflected in economy and therefore, it is expedient to continue normalization policy,” monetary policy committee of the National Bank of Georgia said after a meeting on October 26.
The committee also said that it will gradually reduce key refinancing rate to 6% in the following two quarters.
Georgia’s annual inflation slowed to 0.1% in September from 0.9% in August and 1.5% in July that is far below of 2016’s target level of 5%. In 2017 inflation forecast is set at 4%.
“According to the existing forecasts, inflation will return to its target level in the second half of 2017,” the bank said.
NBG started tightening of monetary policy from February 2015 with the key rate gradually increasing in a course of last year from 4% in the beginning of 2015 to 8% by the end of last year. The key rate was remaining unchanged at 8% in the first three months of this year before starting gradual easing of the monetary policy in April.
The next meeting of central bank’s monetary policy committee has been scheduled for December 14.
