Georgia raises key rate to 10% amid high inflation

The central bank said its tighter monetary policy will help inflation decline in 2022

  
A cashier checks Georgian lari banknotes at the cash centre of the National Bank of Georgia in Tbilisi, Georgia, July 13, 2016.

A cashier checks Georgian lari banknotes at the cash centre of the National Bank of Georgia in Tbilisi, Georgia, July 13, 2016.

Reuters/David Mdzinarishvili

MOSCOW - Georgia's central bank on Wednesday raised its key refinancing rate by 50 basis points to 10%, citing high inflation and saying more hikes were possible.

The central bank said its tighter monetary policy will help inflation decline in 2022 and gradually approach its medium-term target of 3%, down from 11.9% seen in July.

"Economic growth was 12.7 percent in the first half of the year and for 2021 the growth projection was revised upwards to 8.5 percent," the bank said in a statement.

"At the same time, while strong fiscal stimulus is maintained, the current level of lending growth is higher than desired."

The rate hike could provide some support for the Georgian lari amid political volatility caused by the breakdown of a European Union-brokered agreement between the ruling party and the opposition.

"A renewed political tension could filter primarily into additional volatility of the Georgian lari, in our view, while we do not expect this to have a tangible effect on the fiscal position and economic activity," brokerage Renaissance Capital said in a note this week.

(Writing by Andrey Ostroukh and Olzhas Auyezov; editing by Jason Neely and Bernadette Baum) ((andrey.ostroukh@thomsonreuters.com;))


More From Global