Finance

The refinancing rate will gradually decrease along with easing of inflationary risks

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Tbilisi (GBC) - The National Bank takes into account the risks related to the base scenario and continues to reduce the policy rate with moderate steps. As a result, in the medium term, parallel to the easing of inflationary risks, the rate will gradually approach its neutral level of 7%. Acting governor of the National Bank, Natia Turnava, stated this while giving a report in the Parliament, at the Finance-Budget Committee.

While presenting the report, Natia Turnava talked about the importance and ways of achieving the target, short-term interest rate as close as possible to the monetary policy rate in the money market.

According to her, it is important to reflect the change in the monetary policy rate on the market interest rates for the strength of the transmission of the monetary policy carried out by the National Bank to the real economy. As Natia Turnava mentioned during her speech at the committee, the changes implemented in the recent period have already produced certain results.

From May 2023, after the tendency of not only imported but also local inflation to decrease, the National Bank started exiting the strict monetary policy with cautious bids. In total, the monetary policy rate has been reduced by 1 percentage point since May and is 10 percent as of November.

According to Natia Turnava, in order to curb high inflation last year, the National Bank, in addition to the monetary policy rate, used other additional tools, which successfully temporarily slowed credit activity and helped to reduce inflation through this channel.

"Given that this year inflation is low and in the medium term, we expect, it will be close to the target of 3 percent, other things being equal, there is no need to increase credit activity with additional instruments. It should also be noted that the ratio of credit activity to GDP is lower than the trend. That's why we increased the maturity of consumer loans to 4 years," Natia Turnava said.

The Acting President of the National Bank presented to the Finance and Budget Committee of the Parliament today, in accordance with the Organic Law of Georgia "On the National Bank of Georgia", the draft of the main directions of monetary and credit and currency policy for the next three years. tools and the current macroeconomic environment and risks are reviewed.

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