By Agnes Lovasz

Georgia has lifted borrowing costs enough to keep inflation expectations in check and more monetary tightening would impede economic growth, central bank Governor Giorgi Kadagidze said.

“At this point, we don’t see a reason for further tightening,” Kadagidze said in an interview in London on Feb. 25. “We stand ready to go for more tightening in case it’s necessary, but at this stage, it’s not necessary anymore.”

Policy makers have increased the key refinancing rate five times since June by a total of 3 percentage points to 8 percent after a heat wave in neighboring Russia cut wheat supplies and global agriculture and energy prices surged.

The bank’s main goal is to prevent the pickup in food and energy price inflation from increasing cost pressures and wage demands across the economy or causing price growth for other products and services, Kadagidze said.

Food makes up about two-thirds of the consumer-price index in Georgia. The bank last lifted borrowing costs on Feb. 16 by half a point after the inflation rate rose to 12.3 percent in January, the highest since August 2008.

“We did our best to ensure the second-round wave isn’t taking place,” he said. Further rate increases won’t prevent food prices from accelerating and may “kill the growth in other sectors.”

Inflation will begin to moderate in the second half of the year and slow to less than 10 percent by the end of the year, Kadagidze said. It was impossible to make a year-end forecast because the crisis in the Middle East and North Africa was stoking commodity prices, he said.

“I’m very confident by the end of the year we will have single-digit inflation,” he said, adding the price growth will approach the bank’s target rate of 6 percent within three years.

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