The Monetary Policy Committee (MPC) of the National Bank of Georgia (NBG) met on June 18, 2014 and decided to keep the refinancing rate unchanged at 4 percent.
At a February meeting the MPC started a gradual exit from accommodative monetary policy. The speed of the exit depends on the rate of recovery of economic activity and aggregate demand. National Bank still considers the exit out of accommodative policy necessary. However, the recent forecasts suggest that the process will take more time than originally planned. Hence, in order to ensure that inflation reaches its target in the medium term, the Committee decided to keep the policy rate unchanged at this stage.
The NBG forecasts indicate a gradual increase in inflation and it is expected to reach its 5-6% target value in the second half of 2014. Annual inflation in May 2014 was 2.4%.
The recent period has shown a decreasing trend in export growth, indicating the weakening in external demand. One should also emphasize the low growth of credit activity, reflected in insufficient growth of domestic demand. Economic revival at a less than expected rate is the main risk factor for achieving the target inflation.
The NBG will continue to monitor the developments in the economy and financial markets both domestically and abroad and will use all means and instruments at its disposal to ensure the price stability. The dynamics of further changes in monetary policy will depend on the dynamics of expected inflation, tendencies in economic growth, global and regional economic environment.
The next meeting of the Monetary Policy Committee will be held on August 13, 2014.