NBG Keeps Key Refinancing Rate Unchanged at 8%

30/07/2024 - 15:04

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

On July 30, 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 June, headline inflation rose by 2.2% annually, while core inflation was 1.4%. According to the NBG, the moderate increase in the inflation rate last month was caused by the stable level of inflation of locally produced goods and services. The Central Bank notes the lowered inflation forecast, stating that, all things being equal, inflation will remain below the 1.9% target in early 2024 and stabilize around it in the medium term.

The NBG also notes that global economic uncertainty is high, which could lead to inflationary pressures. International markets are experiencing volatility in oil and food prices, as well as rising transportation costs from China, which pose a risk of inflation on imported goods. In addition, global geopolitical tensions remain a significant challenge. Domestically, economic activity is stronger than expected, driven by increased credit activity and domestic demand, NBG says. However, the economy’s overall potential output has also increased, reducing inflationary pressures from the demand side.

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 inflation risks do not materialize and the intensity of inflation risks is reduced, the National Bank will continue to lower the key interest rate to its neutral level with prudent budgets. And if the factors influencing inflation expectations in the direction of growth reemerge, it may be necessary to tighten monetary policy or to maintain the current tight stance for an extended period,” – 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 September 11.

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