Central Bank Reduces Key Rate from 11% to 10.5%
On May 10, the Monetary Policy Committee of the National Bank of Georgia (NBG) reduced the key refinancing rate by 0.5 percentage points to 10.5%.
The NBG cited a downward trajectory of inflation as the reason for the reduction, saying that “the decline in inflation is mainly driven by the reduced prices of imported products.” It also noted that since mid-2022, prices on international commodity markets have gradually declined, and international shipping costs have gone down to their pre-pandemic levels.
“These trends, alongside the appreciated exchange rate, are gradually transmitted to the local market, reducing imported inflation. Hence, inflationary pressures coming from international markets have been neutralized,” the bank said, adding that “domestic inflation is also declining even if at a relatively slow speed and is expected to decline further during the year..”
The Central Bank said that in the short term the annual inflation rate is expected to decline further below the target and stabilize at around 3% in the medium term. “After a prolonged period of high inflation, inflation being below the target in the short run will help to further normalize long-term inflation expectations. The latter, in turn, is a prerequisite for price stability.”
Despite the positive trends, the NBG clarifies that uncertainty is still high. Therefore, under such uncertain circumstances, it is expected that the NBG will continue to reduce the monetary policy rate only at a slow pace. “The NBG continuously monitors the developments in the economy and financial markets and will use all available instruments to ensure price stability,” the bank added.
The next meeting of the Monetary Policy Committee will be held on June 21, 2023.
Also Read:
- 03/05/2023 – Georgia’s Annual Inflation at 2.7% in April
This post is also available in: ქართული (Georgian) Русский (Russian)
