Central Bank Reduces Key Rate to 11%

National Bank of Georgia (NBG) reduced its key certificate deposits rate from 12% to 11%, the NBG’s monetary policy committee said in a statement after meeting on August 20.

“Some loosening of monetary policy is needed because of the possible slowdown in economic activity that has resulted from the recent military operations,” NBG’s monetary policy committee said in a statement. “As a result of the abovementioned events, uncertainty around the expected inflation dynamics has increased.”

“Assuming that significant escalation of the conflict will not occur and that commodity prices will be in line with the existing forecasts, the current policy rate will insure that [annual] inflation target of 8% is achieved by the end of the year.”

It also said that the country’s banking system had shown “resilience” and “robustness” against the background of the crisis. It noted that “increase in risks will cause a decline in the growth of lending, which will reduce inflationary pressures.”

“The worsening investment climate will likely lead to a certain slowdown in capital inflows for the remainder of the year,” NBG said.