NBG President: Long-term High Inflation Will Have a Big Cost
By Natalia Kochiashvili
Wednesday, April 27, 2022
The Head of the National Bank of Georgia (NBG) Koba Gvenetadze attended the annual conference hosted by Columbia University, the main topic of which was ‘Inflation and Market Challenges and Response in Emerging Economies’.
During his address, NBG President raised the globally challenging topic of inflation, indicating the need for the central banks’ vigilance and monetary authorities’ strong reaction to prolonged high inflation.
He said that inflation is rising all over the world, even before the launch of the Ukraine invasion by Russia in February. According to him, supply-demand mismatch and rising commodity (fuel and food) prices have stimulated inflation growth since early 2021.
“Central banks need to be vigilant now, as long-standing high inflation will come at a fairly high cost and the monetary authority will have to respond more strongly. Some central banks in young markets, including the NBG, have already tightened monetary policy to prevent this, in response to rising inflation expectations at the beginning of the normalization cycle of developed economies.”
“However, recent inflation risks are forcing central banks in young markets to further accelerate policy tightening to meet those expectations, which are growing rapidly in the face of prolonged inflation. That is why we tightened the rate of our policy at the last sitting of the Monetary Policy Committee,” Gvenetadze clarified.
The NBG increased its refinancing rate from 0.5% to 11% on March 30 due to increased risks of high inflation expectations and inflation being above the target for a prolonged period.
