The Monetary Policy Committee (MPC) of the National Bank of Georgia (NBG) met on September 6, 2017 and decided to keep the refinancing rate unchanged at 7 percent.

The inflation dynamics is in accord with the existing forecast. The annual inflation in August has decreased to 5.7%. According to the forecast the inflation will remain above the target until the end of the year, whereas in the beginning of 2018, once the temporary factors will have petered out, the inflation will get close to the 3% level. The inflation expectations are stable as well. Hence, the Monetary Policy Committee has decided to keep the policy rate unchanged at the current stage. In case of no additional shocks the policy rate in the medium term is expected to gradually decrease to its neutral level.

The developments in the external demand are still positive. Both the goods exports and tourism revenues have been growing at a high rate, whereas the volume of remittances has been rising as well. At the same time the growth in imports has been moderate. According to the preliminary estimates the economic growth in the first seven months of 2017 was 4.4%. The economic activity is still below the potential and hence there are no inflationary risks from the demand side.

Notably, the larization of the financial sector has been increasing. The credit growth during the year has been mostly caused by the increase in GEL loans. At the same time in the recent months the GEL deposits have been growing as well. The increase in larization reduces the effect of currency fluctuations on the disposable income and fosters the macroeconomic stability in the medium term.

The NBG will continue to monitor the developments in the economy and financial markets and will use all means and instruments at its disposal in order to ensure the price stability.

The next meeting of the Monetary Policy Committee will be held on October 25, 2017.