NBG Reduces Key Refinancing Rate from 8.25% to 8%

On May 22, the Monetary Policy Committee of the National Bank of Georgia (NBG) reduced the key refinancing rate by 0.25 percentage points to 8%.

Inflation in Georgia remains low, the Bank says. In April, headline inflation rose by 1.5% annually, while core inflation was 2.3%. According to the NBG, the moderate increase in the inflation rate last month was caused by increased oil prices. However, the NBG notes that “as a result of a timely and sufficient tightening of monetary policy, the change in prices of locally produced goods normalized around the targeted rate of 3%.” The Central Bank notes the lowered inflation forecast, stating that, all things being equal, inflation will remain below the 3% target in early 2024 and stabilize around it in the medium term.

The NBG emphasizes that, despite the positive trends, uncertainty has increased due to the domestic and geopolitical situation, which increases inflation risks. At the same time, according to the NBG, the lag in economic activity compared to the pre-pandemic trend has been completely eliminated. As a result, stronger-than-expected domestic demand, stimulated in part by increased credit activity, poses an inflationary risk. However, in the baseline scenario, economic activity is expected to stabilize around its potential level and grow by 5.6% in 2024, which, in the NBG’s view, will not lead to additional inflationary pressures.

In view of the positive trends, the NBG decided to slowly withdraw its tight monetary policy stance and lowered the key interest rate by 0.25 percentage points to 8%. However, “if factors amplifying inflation expectations become apparent, the NBG will maintain a tight monetary policy stance for a longer period or further tighten its policy,” – the NGB notes.

“The National Bank of Georgia continuously monitors the current economic processes and financial markets and will use all available instruments to ensure price stability,” – states NBG.

The next meeting of the Monetary Policy Committee will be held on June 19.

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


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