NBG Keeps Key Refinancing Rate Unchanged at 8%

19/06/2024 - 12:55

Vault of the National Bank of Georgia in Tbilisi. Source: NBG

On June 19, the Monetary Policy Committee of the National Bank of Georgia (NBG) decided to keep the key refinancing rate unchanged at 8%.

Inflation in Georgia remains low, the Bank says. In May, headline inflation rose by 2% annually, while core inflation was 1.7%. According to the NBG, the moderate increase in the inflation rate last month was caused by the increase in imported inflation. However, the NBG notes that the change in prices of locally produced goods is still 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. The bank notes that high exchange rate volatility makes inflationary pressures from imported inflation noteworthy. It also notes that international oil prices have recently declined, although the international food price index has been rising for the last two months. In addition, the inflation expectations have risen in recent months. Domestic economic activity is stronger than expected, driven by increased credit activity.

In view of the domestic and foreign inflation risks, the NBG says it decided to leave the key interest rate unchanged at 8%. However, “if additional risks do not materialize, the National Bank will again reduce the key interest rate to its neutral level in a prudent budgetary manner. In the event that the factors influencing inflation expectations in the direction of growth are identified again, it may be necessary to maintain the current strict position for a long time or additionally tighten the monetary 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 July 31.

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