National Bank of Georgia reduces refinancing rate to 10.50% following reduction in inflation

The National Bank of Georgia on Wednesday announced a “gradual exit” from its tight monetary policy. Photo: Nino Alavidze/Agenda.ge

Agenda.ge, 10 May 2023 - 14:36, Tbilisi,Georgia

The National Bank of Georgia on Wednesday announced a “gradual exit” from its tight monetary policy, as it decreased the refinancing rate by 0.5 percent, to 10.50 percent, following a reduction in the domestic inflation rate.

The Bank said inflation in the country was on a “downward trajectory”, mostly driven by reduced prices on international commodity markets and decreased international shipping costs that had gone down to their pre-pandemic levels. 

After a prolonged period of high inflation, inflation being below the target in the short run will help further normalisation of long-term inflation expectations. The latter, in turn, is a prerequisite for price stability”, it said.

The NBG said while inflationary pressures coming from international markets had been neutralised, domestic inflation was also declining “even if at a relatively slow speed, and is expected to keep this downward trend throughout the year”. 

The Bank also shared its projections, saying economic growth would be close to the “potential level” this year, at around five percent, while the annual inflation rate was expected to decline further below the target and stabilise at around three percent in the medium term. 

It also noted economic uncertainty - related to increased labour costs and “geopolitical tensions” - was still high in the country despite the trends, adding it would only “continue to reduce the monetary policy rate at a slow pace”.

The next meeting of the NBG’s Monetary Policy Committee will be held on June 21.