Georgia's central bank cuts refinancing rate to 10%

TBILISI. Sept 14 (Interfax) - The Monetary Policy Committee of the National Bank of Georgia (NBG) decided on Wednesday to lower the refinancing rate to 10% from 10.25%, the bank said in a press release.

This is the third rate cut in recent months. The rate was lowered by 25 basis points to 10.25% in August and in May it was cut to 10.5% from 11%, where it had been since March 2022.

"Inflation, as expected, is below the target rate (3 percent) and in August annual inflation was 0.9 percent, while core inflation stood at 2.5 percent. The role of external factors in the formation of inflation has eased significantly. In particular, since the previous year, prices of raw food commodities on international markets have decreased, and international shipping costs have approached almost its pre-pandemic levels. These, alongside with the appreciation of GEL, have reduced imported goods prices in Georgia," the NBG said, explaining its latest rate cut.

Tight monetary policy and low inflation expectations are also contributing significantly to the decline of inflation, the NBG said.

The current forecast sees inflation remaining below the 3% target level in the coming months of 2023 and staying close to it in the medium term.

But despite these positive trends, inflation risks remain high, as the current tense geopolitical situation increases the uncertainty on commodities markets and credit activity in foreign currency has accelerated, the NBG said, adding that the "continuation of this trend may create additional pressures on inflation outlook down the road."

"Considering these risks, the NBG continues a gradual exit from its tight monetary policy with cautious pace," the bank said.

The next meeting of the Monetary Policy Committee will be held on October 25, 2023.