The Monetary Policy Committee (MPC) of the National Bank of Georgia (NBG) met on September 25, 2013 and decided to keep the refinancing rate unchanged at 3.75 percent.

The overall annual CPI inflation in August was -0.4%, and the prices didn't changed compared to the previous month. The main driver of such price dynamics was the seasonal decrease in fruit and vegetables prices. The base effect also played a significant role. The annual inflation is expected to drop further in September, dues to the temporary supply-side factors. According to the existing forecasts inflation will remain low throughout this year and will approach its target value by the end of 2014.

Despite the expansionary monetary policy the loan activity is still modest. As a result of lower than expected credit growth the aggregate demand is still weak.

There are positive trends in the external sector. Domestic demand is somewhat stimulated by the foreign remittances, with the annual growth in August reaching 11.2%. The increase of tourism revenues is noteworthy as well. An important factor is the export growth, which constitutes an additional impetus for the aggregate demand.

The forecasts of the National Bank have not changed since the last meeting of the MPC. Given that the previous reduction in the policy rate has not as yet had effect on the real economy, the National Bank sticks to the accommodative monetary policy and keeps the policy rate unchanged. The NBG will continue to monitor the developments in the economy and financial markets and will act accordingly.

The next meeting of the Monetary Policy Committee will be held on November 6, 2013.