On September 11, 2024, the Monetary Policy Committee of the National Bank of Georgia (NBG) decided to keep the monetary policy rate (refinancing rate) unchanged. The monetary policy rate stands at 8 percent.
Inflation in Georgia remains below the target of 3 percent. Headline inflation recorded 1.0 percent in August 2024, while core inflation stood at 0.9 percent. The gradual decrease in inflation of domestically produced goods and services largely contributes to maintaining inflation below the target. This reflects the normalization of long-term inflation expectations in the economy, driven by consistent monetary policy adjustments during both tightening and easing periods. Although economic growth has exceeded expectations, demand-side pressures on inflation remain relatively weak. According to the NBG’s assessment, this indicates an acceleration in potential growth. Other things being equal, the current macroeconomic forecast suggests that low inflation will persist in 2024 and stabilize around the target level in the medium term.
Despite these positive developments, it is important to note the high level of global economic uncertainty, which could potentially generate inflationary pressures. Against the backdrop of the current acute geopolitical tensions, disruptions in supply chains and international shipping still persist. In this environment, expected trends in oil and food prices on international markets are highly uncertain, posing risks of rising imported inflation. At the same time, strong economic growth, along with rising potential, is further stimulated by elevated credit activity, primarily driven by domestic demand, which also gives rise to inflationary risks.
As a result of the analysis of the current domestic and external conditions, the NBG has maintained the monetary policy rate unchanged at 8.0 percent. Such a cautious approach to the normalization of monetary policy is important to keep inflation close to its target in the medium term. If inflationary risks do not materialize and the severity of inflationary pressures diminishes, the NBG will continue to vigilantly reduce the policy rate to its neutral level. Conversely, if factors driving inflation expectations upward reemerge, it may be necessary to tighten the monetary policy stance or maintain the current stance longer.
The National Bank of Georgia continuously monitors ongoing economic processes and financial markets and will use all available tools to ensure price stability.
The next meeting of the Monetary Policy Committee will be held on October 23, 2024.
