Georgia’s central bank left its benchmark refinancing rate at 7.25 percent and said it still considers it necessary to maintain a “moderately tight monetary policy” though it will consider easing this stance after a sufficient weakening of the factors that affect inflation.
The National Bank of Georgia (NBG), which has kept its rate steady since raising by 25 basis points in December 2017, lowered the minimum requirement for banks’ reserves in the domestic currency to 5 percent from 7 percent.
The NBG’s guidance is similar to that from May when it also said it would consider a gradual easing of its moderately tight stance once the factors that are pushing up inflation weaken.
Georgia’s inflation rate was steady at 2.5 percent in May and April and it expected to remain around the central bank’s 3.0 percent target during this year.
But the central bank is keeping a tight policy stance as it’s concerned about the volatility in regional and international financial markets, which could affect exchange rates and thus inflation.
Although the lari has been relatively steady this year, it fell sharply in October and November last year before December’s rate hike stopped the fall.
Today the lari was trading at 2.46 to the U.S. dollar, up 5.28 percent this year.
Georgia’s economy has been expanding since early 2017 and the central bank said strong economic activity continued in the first quarter, with growth estimated at 6.5 percent in April for 5.5 percent growth in the first four months, higher than the NBG had forecast.
This will bring the economy closer to its potential level, the central bank added.
Compared with last year, imports grew by 23 percent according to preliminary data in the first five months of the year, while exports were up 28 percent, tourist revenues up by 25 percent and money transfers up by 21 percent.