The Monetary Policy Committee of the Georgian National Bank raised its key refinancing rate to 6.75% from 6.5% following a pick-up in inflation and said it might raise borrowing costs again in the first half of 2017.
Annual inflation was 1.8% in December, up from 0.2% in November, but still far below the government's target of 5% for 2016. The 2017 inflation target is 4%.
The central bank, which cut the refinancing rate several times last year to combat low inflation, said its decision to raise interest rates was based on forecasts showing inflation rising even though consumer demand remains weak, Reuters reports.
"We expect that inflation will be exceeding the target in 2017," it said in a statement, adding that it would consider gradually raising the rate "to 7% in the next two quarters."
The next meeting of the Monetary Policy Committee will be held on March 7, 2017.
