
NBG Keeps Key Refinancing Rate Unchanged at 8%
On January 29, the Monetary Policy Committee of the National Bank of Georgia (NBG) decided to keep the key refinancing rate unchanged at 8%.
The bank said that since 2023, inflation in Georgia has remained below the target level of 3%. In December 2024, the price level increased by 1.9% year-on-year. According to the NBG, “maintaining inflation close to the target was largely determined by domestic economic factors
The prices of domestically produced goods and services, which are considered key indicators of long-term inflation expectations, showed a slow pace increase of 2.2% year-over-year in December. As the Bank noted, the Georgian economy demonstrated growth, averaging 9.4% from January to November 2024 which was “driven by an increase in the economy’s potential output, which helped ease inflationary pressures stemming from robust aggregate demand,” NBG noted.
Despite the favorable inflation dynamics, the central bank warns of increased uncertainty due to domestic and geopolitical turbulence. “If the prevailing uncertainty dissipates in the short term and the situation in international markets remains stable, inflation is expected to remain close to the target in the first half of 2025,” the NBG stated, adding that “subsequently, partly due to base effects, inflation may temporarily overshoot the target and stabilize around 3% in the medium term.”
The Monetary Policy Committee of the Bank has evaluated various risk scenarios in light of the current uncertainties. In a high-inflation risk scenario, “the prolonged uncertainty, further intensifying the geopolitical situation” would amplify inflationary pressures from external factors and dampen economic growth. Conversely, in a low-inflation risk scenario, “the de-escalation of the geopolitical tensions” would reduce inflationary pressures, while economic growth would accelerate relative to its long-term trend, “bolstered by a lower sovereign risk premium.”
Looking ahead, the NBG indicates that as risks subside, the policy rate will gradually normalize toward a neutral level of 7% and aim to keep the overall price level increase close to the 3% target over the medium term.
The next Monetary Policy Committee meeting is scheduled for March 12.
Also Read:
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- 22/05/2024 – NBG Reduces Key Refinancing Rate from 8.25% to 8%
- 13/03/2024 – NBG Reduces Key Refinancing Rate from 9% to 8.25%
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