NBG Reduces Its Policy Rate by 25 basis points to 5.5%
21 November, 2012
The Monetary Policy Committee (MPC) of the National Bank of Georgia (NBG) met on November 21, 2012 and decided to reduce the refinancing rate by 25 basis points to 5.5 percent.
The core and headline inflation were low in October, with the annual inflation reaching 0.1%. Since the previous MPC meeting the inflation forecasts went down. According to the revised forecasts it is expected that the inflation will start moderate growth in the beginning of the next year, although it will remain below its target value throughout the year.
The preliminary economic activity indicators point at the weakening of the demand in October, pushing the price level down. Fiscal consolidation will continue in 2013, having a positive influence on price dynamics.
During the first half of the year the current account deficit was widening. Trade deficit kept deteriorating in the third quarter as well. The CA deficit widening is aggravated by the decrease in remittances’ growth rate, which in turn is significantly influenced by the current economic situation in Europe.
Given that the inflation is predicted to remain below the target in the medium term, the National Bank of Georgia decided to reduce the Monetary Policy Rate.
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 December 19, 2012.
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