National Bank of Georgia keeps refinancing rate at 8% to control inflation

The National Bank of Georgia on Tuesday decided to maintain the refinancing rate at eight percent, citing a “cautious” approach to the normalisation of monetary policy to keep inflation close to its target rate in the medium term.

The central bank noted inflation in the country remained below the target of three percent, with the general price level increasing by one percent annually in August, and the base inflation standing at 0.9 percent.

• Georgian August inflation down by 0.1%, annual figure at 1% - Statistics Office

This reflects a gradual decrease in inflation of locally produced goods and services, indicating a normalisation of long-term inflationary expectations in the economy due to consistent monetary policies”, it said.

The Bank also highlighted a “higher-than-expected” economic activity in the country, with “relatively weak demand-side inflationary pressure”. The body’s current macroeconomic forecast indicated inflation to remain at a “low level” this year and stabilise around the target rate in the medium term.

The Bank also noted “high global economic uncertainty and disruptions” in supply chains and international transportation might create risks of inflation of imported goods.

The NBG said it would continue to reduce the policy rate to its “neutral level with cautious budgets” if inflationary risks do not materialise, but tighten monetary policy if factors affecting inflation expectations indicate growth.