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Georgia maintains rate, sees 6% rate in next 2 quarters

Wednesday, October 26, 2016 5:54
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    Georgia’s central bank left its policy rate unchanged at 6.50 percent, saying past rate cuts were not fully reflected in the economy, but it expects to cut the rate to 6.0 percent over the next two quarters.
    The National Bank of Georgia (NBG) has cut its rate four times this year by a total of 150 basis points and said in September that it aimed to cut the policy rate to 6.0 percent in the “medium term” as demand is still expected to remain weak and inflation expectations indicate that the rate has to be cut further to reach a neutral level.
    But the central bank said there had been an increase in demand for variable rate loans denominated in lari, which had helped improve the transmission mechanism of its monetary policy.
    To further improve this transmission, the central bank wants its loosening to have further effect and decided therefore to maintain the rate this month.
    Georgia’s inflation rate eased to 01 percent in September from 0.9 percent in August and the central bank expects inflation to return to its target in the second half of 2017.



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