“The impact that a new geopolitical challenge will have on prices depends on the duration of this shock, the military actions, and the related difficulties. The National Bank is prepared for all scenarios,” said the President of the National Bank, Natia Turnava.
According to her, Georgia’s main response to inflationary shocks is the monetary policy rate.
“The effect that a new geopolitical challenge will have on prices depends on how long the shock, the military actions, and the associated complications last. The National Bank is ready for all scenarios. We have conducted our internal calculations, based on which our policy decisions are made, in correlation with oil price levels. This is a key indicator affecting the global economy, not just Georgia. However, it also affects Georgia, as we are an oil-importing country. Our general response to inflationary shocks — our main tool — is the monetary policy rate.
Despite having relatively low inflation periods, due to significant uncertainty in the region, the ongoing Russia-Ukraine war, and other risks, including the risk of conflict in the Middle East — which we had already considered in one of our scenarios — we approached this challenge with a relatively tightened policy rate. Our policy rate is 8%. We have maintained it for many months. Our neutral rate is 7%. We had hoped to reduce it later. However, like many leading central banks, we are currently in a waiting mode, observing how events unfold and how long the shock will last. Accordingly, we are also ready to tighten our policy further if needed, but we will monitor developments.
In general, the central bank of Georgia has been known during recent shocks for reacting faster than others, and this will continue,” said Natia Turnava.
