NBG Reduces Its Policy Rate By 50 Basis Points To 4.75%
13 February, 2013
The Monetary Policy Committee (MPC) of the National Bank of Georgia (NBG) met on February 13, 2013 and decided to reduce the refinancing rate by 50 basis points to 4.75 percent.
According to existing information the inflation forecasts for the coming 4-6 quarters have gone further down since the previous meeting of the MPC. According to the current forecasts it is expected that the headline CPI inflation will remain below its target value throughout this year and will approach it in the second half of 2014.
Both core and headline inflation values in January were low, with the headline annual inflation reaching -1.6%. Negative values of inflation were mainly caused by the decrease in food prices. An important one-time factor was also the reduction in regulated prices (electric power and garbage collection services).
The preliminary economic activity indicators in the fourth quarter point at the weakening in economic growth, pushing price level downwards. The NBG forecast of the economic growth rate in 2013 has not changed at the moment, and will be revised based on the data for the first quarter of 2013.
In the past year the slowdown in the aggregate demand was caused both by external and domestic factors. Credit activity in the country still remains weak, due to low demand for loans. Drop in European growth rates has been reflected in the low growth of remittances during the past year. Another indication of weakening demand is the decrease in export and import growth rates in the fourth quarter of 2012.
Given that the inflation is predicted to remain below the target in the medium term, the National Bank of Georgia decided to continue monetary easing and 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 March 27, 2012.
Other News