NBG Reduces Key Refinancing Rate from 10.25% to 10%

On September 13, the Monetary Policy Committee of the National Bank of Georgia (NBG) reduced the key refinancing rate by 0.25 percentage points to 10%.

The NBG cited a downward trajectory of inflation as the reason for the reduction. In August, annual inflation in Georgia was at 0.9%. This was influenced by external factors, including lower prices of food and raw materials. The cost of international shipping also dropped to almost pre-pandemic levels, and the stronger GEL exchange rate reduced the price of imported goods in Georgia. Additionally, tighter monetary policy and lower inflationary expectations contributed to the decrease in local inflation, which stood at 6.1% in August, although still declining at a relatively slow pace.

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 months after 2023. “It should be noted that, in the short run, inflation below target contributes to the normalization of long-term inflation expectations.”

Despite the positive trends, the NBG clarifies that uncertainty is still high due to the geopolitical situation. “In terms of inflationary pressures, in addition to external risks, domestic economic developments remain noteworthy. Despite the stabilization of aggregate demand, it is noteworthy that foreign currency lending has accelerated. The continuation of this trend may lead to additional inflationary pressures in the future,” – notes NBG.

Considering the inflation dynamics and forecasts of the previous Monetary Policy Committee meeting, the NBG decided to start a gradual exit from its tight monetary policy stance, which implies refinancing rate reduction at a moderate 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 October 25, 2023.

Also Read:

• 02/08/2023 – NBG Reduces Key Refinancing Rate from 10.5% to 10.25%
• 21/06/2023 – NBG Keeps Key Rate at 10.5%
• 10/05/2023 – Central Bank Reduces Key Rate from 11% to 10.5%

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