Georgian Central Bank Rate Cut
May 22, 2024
The National Bank of Georgia‘s policy interest rate has been cut by 25 basis points to 8.0%. This was the third reduction this year and brings the cumulative drop over the past 12 months to 300 basis points. CPI inflation in Georgia of 1.5% is only half the 3% target level but also at an 11-month high and up from zero percent in January. A released statement expresses guarded optimism tempered by caution along the path of interest rate normalization:
The NBG estimates that the gap between economic activity and its pre-pandemic trend has fully closed. As a result, higher-than-expected demand can also trigger inflationary risks. This strong demand is partly driven by increased credit activity. However, according to the baseline scenario, economic activity would stabilize around its potential level, with real growth reaching 5.6%. In this case, demand-side inflationary risks would not materialize.
In light of these factors and analysis of current domestic and external challenges, the National Bank of Georgia has decided to reduce monetary policy rate by 0.25 percentage points to 8.00 percent. The NBG will continue to normalize the monetary policy rate only gradually and cautiously. If factors amplifying inflation expectation risks become more pronounced, the NBG may need to maintain the current tight stance for a longer period or even tighten policy further.
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: National Bank of Georgia
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