The Monetary Policy Committee of the National Bank of Georgia decided to lower the refinancing rate from 9% to 8.5%, said the head of the National Bank Koba Gvenetadze.
The National Bank began to tighten monetary policy in September 2019 to neutralize inflationary pressures after the exchange rate depreciated. The refinancing rate for this period increased from 6.5% to 9%. The last time the refinancing rate increased in December 2019.
The annual inflation rate in March was 6.1% with a target of 3% and it is expected that it will remain at a high mark until the end of the year, and will approach the target by the first half of 2021. At the same time, due to the global economic crisis, demand declined.
“Given the weakening demand, maintaining a tight monetary policy is impractical, respectively, the National Bank’s monetary policy committee began a gradual exit from tight monetary policy and reduced the rate by 50 basis points to 8.5%. Despite this, monetary policy remains tight, which will ensure a return to the target in the medium term,” Gvenetadze said.
A decrease in the refinancing rate by the National Bank of Georgia will lead to a decrease in interest rates by 119.7 thousand loans.
The refinancing rate is the amount of interest on an annualized basis that credit organizations pay to the National Bank for loans granted to them. The rate is the main instrument of the monetary policy of the National Bank and is considered a guideline for market rates in the financial sector.