The Monetary Policy Committee (MPC) of the National Bank of Georgia (NBG) met on June 20, 2012 and decided to lower its Main Policy Rate (the refinancing rate) by 25 basis points to 5.75 percent.

The annual inflation in May equaled -3.3%, the negative value of inflation mostly due to the base effect. According to the existing forecasts the annual inflation is expected to start growing in June, although it will remain below the target value both throughout this year and in the beginning of 2013.

Georgian economy grew by 6.8% in the first quarter of 2012, with the notable high growth in manufacturing and construction sectors. The economic activity indicators point at an even higher growth in the second quarter. Despite high growth rates the output gap is close to zero, so that there are no demand side inflationary pressures.

Since the inflation forecast in the medium term is lower than the target value, National Bank of Georgia reduced the Monetary Policy Rate by 25 basis points.

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 July 18, 2012.