NBG cut the key rate by 50bps to 10.5%
The NBG cut its key rate by 50bps to 10.5% on 10 May 2023 meeting, marking the first rate cut since May 2020. The decision was prompted by a significant deceleration of annual inflation, which dropped to 2.7% in April 2023 from 9.4% in January 2023. The NBG attributed the decline in inflation to a decrease in imported inflation, driven by falling global commodity prices and international shipping costs, which returned to pre-pandemic levels, along with the significant appreciation of the GEL. The NBG also sees a slowdown in domestic inflation and expresses optimism about the decreasing trend to continue through the end of 2023. According to the NBG’s current forecast, average annual inflation expected at 2.8% in 2023. Additionally, the NBG revised Georgia’s economic growth forecast to 5.0% for 2023, up from the previously projected 4.0%. The regulator also signaled that it would continue to reduce the monetary policy rate but only at a slow pace, due to risks from geopolitical tensions. The next committee meeting is scheduled for 21 June 2023.
