Central Bank Cuts Key Rate to 7%

Georgia’s central bank continued gradual easing of monetary policy as it cut its key refinancing rate by 50 basis points to 7% on Wednesday.

Monetary policy committee of the National Bank of Georgia (NBG) said after its meeting that it would further continue gradual reduction of the key rate in mid-term period to a “neutral” level; the central bank has previously indicated that it considers “neutral” level in a range of 5-6%.

Georgia’s annual inflation rate slowed to 2.1% in May from 3.2% in April, far below central bank’s target level of 5% for 2016.

NBG’s monetary policy committee said that it expects the annual inflation to remain below the target level in following months and to increase to next year’s target level of 4% in the first half of 2017.

NBG started tightening of monetary policy from February 2015 with the key rate gradually increasing in a course of last year from 4% in the beginning of 2015 to 8% by the end of last year. The key rate was remaining unchanged at 8% in the first three months of this year before cutting it to 7.5% in April.

Central bank’s monetary policy committee will hold its next meeting on July 27.