The NBG, during today’s extraordinary Monetary Policy Committee meeting raised the policy rate by 50 basis points to 7.5%.
The move was well expected as the GEL remains strongly undervalued with high pass-through on the inflation (see TBC Research earlier note on the scheduled MPC meeting).
According to the NBG, all means and instruments will be used to ensure the price stability. Also, the assessment of the external sector dynamics is positive, what together with the tighter monetary stance, contributes to the GEL appreciation through the expectations channel.
“Unless the GEL strengthens, we expect another, probably 50 basis points rate hike during October 23 MPC meeting as well as the usage of other tools”, TBC research said.