Page 41 - GEORptDec19

being a majority of independent non-executive members of the Board.
8.2 ​Central Bank policy rate
Georgian monetary policy rate tightened further by 1pp to 8.5%
Georgia’s central bank on October 23 raised its key refinancing rate by 1pp to 8.5%, thus continuing its efforts to curb inflation partly fuelled by expectations for imminent currency depreciation.​ The national currency remains undervalued, the central bank stated.
The future decisions of the committee will depend upon the speed of the neutralisation of exchange rate pressure stemming from the exchange rate depreciation. Georgia’s monetary authority has increased its policy rate by 2pp in three steps taken over the the past two months. It also intervened on the foreign exchange market by selling $40mn in August and the same amount of foreign currency in September to prevent volatility.
In September, the annual inflation rate stood at 6.4% y/y. Along with one-off factors, the overshooting of the target was caused by the increased pass-through from the nominal exchange rate depreciation to inflation in recent periods, the central bank explained.
According to its forecast, other things being equal, inflation will remain above the target during this year, will start to decline from March 2020 and stay close to the target (5% +/-1pp) in the medium term.
The Georgian lari’s nominal effective exchange rate remains undervalued, exerting upward pressure on inflation, the central bank stated.
This inflationary pressure is only partially offset by the aggregate demand-side factors as economic activity is stronger compared to previous periods.
41​ GEORGIA Country Report​ December 2019 ​ ​www.intellinews.com