17.09.2008: NBG Maintains Bank Rate at 10.0%
17 September, 2008
The Monetary Policy Committee (MPC) of the National Bank of Georgia (NBG) decided during its meeting on September 17 to leave its Main Policy Rate, the Refinancing Loan Rate, unchanged at 10 percent.
The Committee noted that since its unscheduled meeting on September 12 there are certain positive trends in the banking sector, especially in the growth of deposits. Risks to financial stability have decreased considerably as well. Despite the adequate amount of liquidity which currently exists in the banking system, commercial banks need additional time to evaluate the risks and adjust to the new environment, due to which credit creation has slowed.
Money supply decreased considerably during the recent military conflict, a factor which should have a positive effect on the reduction in the general level of prices. However a sharp or a less than expected change in the money supply may have a negative effect on economic growth and on the inflation rate of the following periods. The proposed supplement budget, which envisages increase in the deficit in the amount of of GEL 500 million, will help to increase the money supply.
The Board of the International Monetary Fund approved on September 15 a loan in the amount of USD 750 million for Georgia, under the 18-month stand-by arrangement, which is designed to support the Balance of Payment. It is expected that the approval of the stand-by program will increase investor confidence which should help the Georgian companies in attracting foreign capital from international markets.
The existing inflation risks have not changed since the last meeting of the MPC. Prices of the main commodity groups, including those of oil and wheat products, have continued to decline.
The next meeting of the Monetary Policy Committee will take place on October 15, 2008.
The Committee noted that since its unscheduled meeting on September 12 there are certain positive trends in the banking sector, especially in the growth of deposits. Risks to financial stability have decreased considerably as well. Despite the adequate amount of liquidity which currently exists in the banking system, commercial banks need additional time to evaluate the risks and adjust to the new environment, due to which credit creation has slowed.
Money supply decreased considerably during the recent military conflict, a factor which should have a positive effect on the reduction in the general level of prices. However a sharp or a less than expected change in the money supply may have a negative effect on economic growth and on the inflation rate of the following periods. The proposed supplement budget, which envisages increase in the deficit in the amount of of GEL 500 million, will help to increase the money supply.
The Board of the International Monetary Fund approved on September 15 a loan in the amount of USD 750 million for Georgia, under the 18-month stand-by arrangement, which is designed to support the Balance of Payment. It is expected that the approval of the stand-by program will increase investor confidence which should help the Georgian companies in attracting foreign capital from international markets.
The existing inflation risks have not changed since the last meeting of the MPC. Prices of the main commodity groups, including those of oil and wheat products, have continued to decline.
The next meeting of the Monetary Policy Committee will take place on October 15, 2008.
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