National Bank of Georgia maintains monetary policy rate amid “low” inflation

The National Bank of Georgia on Wednesday announced its Monetary Policy Committee’s decision to keep the refinancing rate unchanged at eight percent, citing the year-over-year inflation rate of just 1.3 percent in November, which it said remained below the target of three percent.

Core inflation figures revealed a slightly higher rate of 1.6 percent, suggesting that the Bank’s “consistent” monetary policy approach had ensured maintenance of a low-inflation environment, it added.

Prices for domestically produced goods and services saw a moderate annual increase of 1.8 percent, the Bank also noted.

Despite “strong” economic activity that saw an average growth rate of 10 percent over the first 10 months of the year, the NBG noted the potential of the economy had also risen, which the Bank said “partially offsets inflationary pressures stemming from strong demand”.

Looking ahead, the NBG forecasts inflation will remain below the target throughout 2024, averaging around 1.2 percent before stabilising at about three percent in the medium term.

However, the NBG said the economic outlook was complicated by “high uncertainty”. Domestic factors, along with ongoing geopolitical tensions in the region, could elevate the country’s sovereign risk premium and subsequently lead to increased inflationary pressures, the body said.

Additionally, the Bank said rising international food commodity prices and higher global shipping costs posed further risks to price stability.

The body added it was prepared to gradually reduce the policy rate toward its neutral level of seven percent if inflationary risks did not materialise and conditions improved.

However, if factors that increase inflation expectations re-emerge, monetary policy may need to be tightened or the current tight stance maintained for a longer period”, it said.

The next meeting of the Committee is scheduled for January 29.