Central bank keeps refinancing rate at 11%, says inflation to remain high this year

The national bank of Georgia has decided to keep the refinancing rate unchanged at 11 percent following a meeting of its monetary policy committee on Wednesday.

The financial institution said the domestic inflationary pressure was still high (amounting to 11.5 percent in September) despite the fact that inflation had retreated from its peak.

The NBG said it expected inflation to gradually reduce following "positive trends observed in international commodity markets".

Commodity prices and international shipping costs are declining [...] The international food price index [...] has been falling for six consecutive months. It is expected that in line with the appreciated exchange rate, these trends will gradually be transmitted to the local market, reducing inflation. However, given the current geopolitical circumstances, uncertainty still remains high”, the NBG said.

The forecast of the institution said inflation would remain high until the end of the year, but would continue to gradually decline and approach the target level in the second half of 2023. 

Taking into account the existing inflationary risks, a tight monetary policy will be maintained, and its normalisation will gradually begin only after a clear trend of decreasing inflation is observed", the bank said.

The NBG said it would continue monitoring developments in the economy and financial markets to ensure price stability.

The next meeting of the monetary policy committee will be held on December 21.