National Bank of Georgia Drops Refinancing Rate 25bps to 7.50%

The National Bank of Georgia decreased its benchmark refinancing interest rate by 25 basis points to 7.50% from 7.75%.  The Bank said (translated) the high rate of inflation (8.5% in July) was mainly driven by food price rises (6.7%), and it expects inflation to reduce in the coming months; towards target by the end of the current year.  The interest rate decrease was preventative in nature, in order to keep inflation around the target level in the medium term.  The Bank also noted the economic growth risks in the US and eurozone economies; commenting that it may ease pressure on commodity prices, but also impact on global growth risks.

Previously the Georgian central bank also cut the interest rate by 25bps to 7.75% in Jun, after holding steady in May (the bank last increased the rate by 50 basis points in February this year).  Georgia reported annual consumer price inflation of 8.5% in July, down from 13.5% in April, and above the Bank's inflation target of 6.0%; meanwhile the full-year government inflation forecast is 7%.  According IMF statistics, Georgia saw average annual inflation of 4.95% in 2010, with the full year figure at 5.04%, while the Georgian economy grew just 2%.

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