TBILISI, DFWatch–The National Bank of Georgia further increased the refinancing rate to 6.0 percent on Wednesday.
The Bank’s president, Giorgi Kadagidze, said at a briefing that increasing the refinancing rate by half a percent is a response to an increased expectation of inflation and domestic and external risks in the economy.
Kadagidze spoke about national currency rates and conditions influencing it, like reduced remittances, reduced import and other factors. He gave several recommendations about what to do in the future to avoid a further worsening of the situation. The first thing would be that if the pressure on the national currency lari continues, the government should be ready to further adjust the budget and current expenses.
“Domestically, a factor worth mentioning is the attempt to discredit the policy of the National Bank, which pushes up the long term interest rates, weakens the monetary policy transmission efficiency and drives up inflation expectations,” NBG explains.
By the end of the year, the refinancing rate will further increase to 6.5 percent.
NBG believes that the government should work on a plan with certain dates to react to today’s shocks, like income from privatization or investments.
The NBG has decided to hold a briefing after each session of the monetary policy committee to explain current trends in the economy.
The committee’s next meeting will be on September 23, 2015.
The main refinancing rate is a way for the central bank to affect the interest rates that consumers will notice in the retail banking market. Last time NBG increased the refinancing rate was in the beginning of July when it was adjusted to 5.5 percent.