Central Bank Holds Key Rate at 11%

On March 29, the Monetary Policy Committee of the National Bank of Georgia (NBG) kept the refinancing rate unchanged at 11%.

NBG said that despite certain stabilization signs, inflation remains a global challenge, noting that annual inflation is still high in Georgia and that “the reduction of headline inflation has been supported by tight monetary policy and fiscal consolidation.”

According to the central bank, the current forecast, due also to the base effect and tightened monetary policy stance, “shows that the headline inflation will continue declining at a significant rate, and is likely to be below the target level in the second half of the year, ensuring that long-term inflation expectations remain anchored to the target.”

The NBG, however, noted that “uncertainty remains quite high, due to the severe geopolitical situation.” The bank also stressed that “productivity growth has been lagging behind the wage growth.” In particular, in the fourth quarter of 2022, wages have increased by 21.2 percent annually, while productivity was up by only 6.8 percent. “This trend is reflected in the prices of domestic goods and services, growth rate of which is still high and amounts to 13.8 percent.”

“If the current trends are maintained, it will be possible to begin a gradual exit from the tight monetary policy stance only after the trend of reduction in domestic inflation is evident,” the central bank added.

The next meeting of the Monetary Policy Committee will be held on May 10, 2023.

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This post is also available in: ქართული (Georgian) Русский (Russian)


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