Leaving the monetary rate unchanged by the NBG is the correct step and a reasonable precaution. This is how Giorgi Ghaghanidze, Dean of the Faculty of Economics of Tbilisi State University, evaluates the decision of the Monetary Policy Committee of the National Bank to leave the refinancing rate unchanged at 8%.

According to his assessment, the National Bank of Georgia does not make decisions based on expectations, but only after the fact.

As he added, the NBG is steadily following and developing a cautious and thoughtful monetary policy.

The Monetary Policy Committee of the National Bank of Georgia [NBG] decided to keep the Monetary Policy Rate (the refinancing rate) unchanged. The policy rate stands at 8.00%. Inflation in Georgia is still low and remains below the target rate. In May 2024, the overall price level increased by 2.0% annually, while core inflation stood at 1.7%. The moderate increase in the inflation rate compared to the previous month was mainly due to an increase of imported inflation, while the change in the prices of domestically produced products are still close to the 3% target. According to the current forecast, other things equal, inflation is expected to be around the target of 3% in the 2nd half of 2024.

Given the current analysis of domestic and external conditions the NBG has decided to maintain the policy rate at 8.00%. If no additional risks materialize, the NBG will cautiously continue policy rate reduction towards its neutral level. However, if risks amplifying inflation expectations become more pronounced, the NBG may need to maintain the current tight stance for a longer period or even tighten policy further.