The Monetary Policy Committee (MPC) of the National Bank of Georgia (NBG) met on May 23, 2012 and decided to lower its Main Policy Rate (the refinancing rate) by 25 basis points to 6 percent.

According to the existing forecasts the annual inflation is expected to start moderate growth from June, although it will remain below the target both throughout this year and in the beginning of 2013. The annual inflation in April equaled -2.2%, the negative value of the inflation mostly due to the base effect.

The economic activity indicators point at moderate growth and there are no risks of economic overheating and demand side inflationary pressures.

The GEL nominal exchange rate has appreciated, causing in April, despite low levels of inflation, the real appreciation. Exchange rate appreciation is related to the foreign currency flowing into the country through tourism and foreign investment, which is confirmed by the growth of foreign cash inflows into the banks. The foreign remittances have increased as well, although in the recent months, their growth rates have declined. It should be noted that the increase in foreign currency inflows is not completely reflected in the economic growth, since these inflows are followed by the significant increase in imports.

Since the inflation forecast in the medium term is below the target, 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 June 20, 2012.