Page 18 - GEORptSep20

4.2​ Inflation 4.2.1​ CPI dynamics
Easing inflation opens door to more rate cuts in Georgia
Georgia’s inflation rate eased for the third month in a row to 5.7% y/y in July from 6.9% y/y in April, after consumer prices decreased in monthly terms for the second straight month, with the reduction 0.5% m/m in July, national statistics office Geostat announced.
The last monetary policy move was a moderate 25bp rate cut on June 24, taking the key rate to 8.25%, but the inflation figures confirming the central bank’s forecast open the door for another rate cut, something that bodes well for a much-needed economic recovery.
“Despite the rate cut, monetary policy remains tight, ensuring a return of inflation to its target level in the medium term. The pace of further policy normalisation will depend on how quickly inflation expectations recede," the National Bank of Georgia said in June when the last cut was introduced.
The central bank said in May that annual inflation stood at 6.5% and that according to its forecast it would continue to gradually decline over the rest of the year, reaching the 3% target level in the first half of 2021.
The main contributor to annual inflation in July remained food prices (+11.5% y/y), which accounted for 3.55pp of the 5.7% y/y inflation rate in July.
Within the food goods group, prices particularly increased for fruit and grapes (32.0% y/y), coffee, tea and cocoa (17.4%), milk, cheese and eggs (14.6%), fish (14.3%), oils and fats (12.6%), meat (11.5%), mineral waters, soft drinks, fruit and vegetable juices (10.2%).
18​ GEORGIA Country Report ​September 2020 ​ ​www.intellinews.com