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The Monetary Policy Committee (MPC) of the National Bank of Georgia (NBG) met today and decided to leave its main policy rate unchanged at 11 percent.

Economic activity and the level of capital inflows remain strong and will likely remain at a high level for the remainder of the year.  In March, the inflow of foreign capital intensified in particular, which was marked by an increase in NBG interventions in the foreign exchange market. 

The annual inflation rate in February made up 10.9 percent, while the average annual inflation was 9.3 percent.  The inflation rate still remains quite high in the major trading partner countries of Georgia, which is mainly due to increases in the prices of energy and food products. As of February, the inflation rate was 12.7% in Russia, 21.9% in the Ukraine, 17.1% in Azerbaijan, 7.4% in Armenia, 9.1% in Turkey, 3.1% in the Eurozone and 4.0% in the U.S. 

The tensions in international markets, particularly in the U.S., continued to intensify, leading to a sharp depreciation of the US Dollar against other foreign currencies, causing prices of major commodities to increase.

Despite the fact that growth in the monetary base is moderate compared to previous years, due to a rapid expansion of the money multipliers monetary aggregates continue to grow rigorously.The short-term interest rates in the interbank market increased and surpassed 11 percent, which is a result of a tighter monetary policy of the previous period.

Taking into consideration that significant increases in administrative prices will not be observed and commodity prices will be in line with the existing forecasts, the current interest rates will insure that an inflation rate of 8 percent will be achieved by the end of the year. In addition, the inflation risks mentioned in the previous Monetary Policy Committee statement have not changed. 

The NBG will closely monitor the developments in the economy and financial markets with the objective of achieving the forecast inflation rate and will in due course act accordingly. 

The schedule of the MPC meetings is posted on the website of the NBG. The next meeting will take place on April 16, 2008.   

Contact:
Giorgi Kalandadze,
Head of Public Relations Department

Tel.:(995 32) 442 488
E-mail: prd@nbg.gov.ge