Georgian National Bank maintains refinancing rate

The Georgian National Bank decided to keep the refinancing rate unchanged at 8% as inflation in the country remained below the target rate, with overall prices increasing by 2% annually in May and core inflation at 1.7%.

The Bank's Monetary Policy Committee expressed concerns about “heightened uncertainty” stemming from “domestic and external challenges” and highlighted the impact of exchange rate volatility on imported inflation.

It also noted recent fluctuations in international oil and food prices, along with the surge in inflationary expectations in recent months.

"International oil prices have recently decreased, but the international food price index has been increasing for the last two months. Inflationary expectations have risen in recent months while domestic economic activity is also stronger than expected, driven by increased credit activity”, the statement reads.

The Bank added it would gradually return to reducing the policy rate to its neutral level if additional risks did not materialise. However, it also warned fuel inflation expectations could potentially lead to maintaining the current strict position for an extended period or necessitate further tightening of monetary policy.