NBG Keeps Its Policy Rate unchanged at 4.00%

NBG Keeps Its Policy Rate unchanged at 4.00%

07 May, 2014
The Monetary Policy Committee (MPC) of the National Bank of Georgia (NBG) met on May 7, 2014 and decided to keep the refinancing rate unchanged at 4 percent.

At a February meeting the MPC decided to start gradual exit from accommodative monetary policy. In order to ensure price stability the Committee considers the macroeconomic forecast and current risks analysis when formulating monetary policy decisions. Given improvements in economic activity and increase of the expected inflation, which gradually gets closer to the target value, the Committee still considers the exit out of accommodative policy necessary. However, recently originated geopolitical risks contain increased uncertainty for the economic environment and taking those risks into account the committee decided to keep the policy rate unchanged at this stage.  

As regarding the domestic demand, the positive tendencies have been retained in the first quarter of 2014. Economic activity keeps growing at a moderate rate: according to preliminary estimates the economic growth in the first quarter of 2014 was 7.4%, which, to a certain extent, was due to a base effect. Despite high growth levels the output gap is still negative. One should also mention the relative slowdown in credit activities in the recent period. 

Given the existing data the NBG forecast indicates that inflation will gradually grow and most likely will reach its target value in the second half of 2014. Annual inflation in April 2014 was 3.4%. 

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 June 18, 2014.