Rate Cut at National Bank of Georgia
August 2, 2023
The National Bank of Georgia’s benchmark interest rate has been cut a second time. The drop of 25 basis points to 10.25% follows an initial 50-basis point reduction in May. The rate remains above the pandemic low of 8.0% and Georgian on-year CPI inflation, which at 0.6% in June was its lowest in 79 months and down from a 127-month high of 15.9% in December 2021. A released statement defends the case for normalizing the policy rate “only at a moderate pace.”
Despite the favorable dynamics, inflation risks remain high. The current tense geopolitical situation increases the uncertainty on the commodities markets… If due to strong aggregate demand the economic growth turns out to be even higher, additional pressure on inflation will arise… wage growth significantly exceeds the productivity growth. If sustained for a long time, such a trend will increase production costs and eventually affect the prices as well.
Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: National Bank of Georgia
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