Georgian central bank keeps refinancing rate unchanged at 8%

The National Bank of Georgia on Tuesday said its Monetary Policy Committee had decided to keep the refinancing rate unchanged at eight percent.

The Bank said inflation had remained “below the target” of three percent and was aided by stabilisation of inflation for domestically produced goods and services, noting the Bank’s “timely and consistent monetary policy” had reflected the normalisation of long-term inflation expectations, while low inflation was also supported by increased competition in the economy.

However, global economic uncertainties persist and could pose inflationary risks. Recently, volatility in oil and food prices, coupled with rising shipping costs from China, has increased inflationary risks of imported goods. Additionally, global geopolitical tensions continue to be a significant challenge”, the institution noted.

Besides external factors, domestic economic activity is stronger than expected, driven by increased credit activity largely due to robust domestic demand. Despite this, the overall production capacity of the economy has risen, which mitigates inflationary pressures from the demand side”, the Bank added.

The NBG said maintaining the refinancing rate at eight percent was a “cautious approach” to keep inflation “close to its target in the medium term”, and noted it would continue to “vigilantly reduce” the policy rate to its neutral level if inflationary risks do not materialise and the intensity of inflationary pressures decreases.

The next meeting of the Monetary Policy Committee of the Bank is scheduled for September 11.