The Monetary Policy Committee (MPC) of the National Bank of Georgia (NBG) met on June 22th, 2011 and decided to keep its Main Policy Rate (the refinancing rate) unchanged at 8 percent.

Annual inflation reached 14.3 percent in May 20011, mostly due to supply-side shocks. The share of food price increase in the annual inflation was 12.6 percentage points. Annual core inflation (excluding food and fuel prices) is still low (1.7%), as is he inflation in the service sector (1%). Hence the demand side inflation risks are low.
 
Since the last MPC meeting the inflation forecast hasn’t changed. According to the existing forecasts the inflation will keep decreasing and will be around 8% by the end of the year, whereas in 2012 it will reach the target.

The real growth of the economy in the first quarter of 2011 has dropped compared to the previous quarters and is equal to 5.8%, indicating the reduction in the demand growth rates.

World oil prices were still decreasing in June. According to existing forecasts, this trend will prevail in coming periods, which, presumably, will be reflected on Georgian consumer market.

In case the above mentioned trends will continue the National Bank will consider monetary easing at its further meetings.

The next meeting of the Monetary Policy Committee will take place on July 20th, 2011