National Bank of Georgia again holds refi rate at 8%

TBILISI. May 7 (Interfax) - The National Bank of Georgia's Monetary Policy Committee at a meeting on May decided for the third time this year to hold the monetary policy or refinancing rate at 8% per annum, which has been valid since June 19 last year, the NBG said in a press release.

"The Monetary Policy Committee considered it optimal to maintain a cautious approach toward the further normalization of the policy rate and decided to keep the monetary policy rate unchanged at 8%. Upcoming decisions on the policy rate will depend on the analysis of risks and resulting updated macroeconomic forecast scenarios," the regulator said.

Inflation remains close to the target level of 3% with annual inflation at 3.4% in April. "Considering increased global uncertainty, domestic tendencies and expectations in financial markets, the NBG's central scenario projects that inflation will temporarily exceed the target in 2025, stabilizing around 3% in the medium term, the regulator said.

External pro-inflationary factors include the recent increase in uncertainty in international markets, which is fueled by tariff policy and the acceleration of economic fragmentation. The materialization of these risks, in turn, would disrupt supply chains and create a globally high-inflationary environment, which would subsequently have an impact on Georgia.

Internal inflationary risks are associated with growing demand pressure on prices amid high economic growth, which was 9.3% in the first quarter of this year. In connection with the data for the first quarter, the NBG revised upward its forecast for economic growth in Georgia this year, increasing it from 5% to 6.7%.

Disinflationary factors include the global weakening of the U.S. dollar, alleviating inflationary pressures through the import channel. Also, in the context of declining global demand and expectations of increased oil supply, international oil prices are falling.

The regulator said that on the domestic market long-term inflation expectations remain stable, as indicated by both the domestic (excluding the bread price effect) and service inflation measures, which remain close to the target level of 3%.

The NBG's Monetary Policy Committee will next meet on June 18.

The NBG lowered the rate three times in the first half of last year, by 0.25 pp on May 22, 0.75 pp in the middle of March and 0.5 pp in January, as inflation slowed. The rate has been 8% since June 19.

Monetary policy guidelines for 2025-2027 state that the NBG plans to lower the policy rate cautiously in the medium term, but it will not fall below 7% per annum in the next three years.