The Monetary Policy Committee (MPC) of the National Bank of Georgia (NBG) met on 14^th of December 2016 and made a decision to keep refinancing rate unchanged at 6.5%.

The decision is made following the macroeconomic forecast, according to which, in the medium term the factors affecting inflation from the demand side will be weak. However, transmission of external shocks recently and expected increase in excise tax will have one time effect on prices. But if inflation expectations are contained this will have only temporary effect on inflation rate. Taking this into account National Bank of Georgia considers keeping the rate unchanged in the short run and will continue to monitor the development of inflationary expectations.

Inflation rate is close to zero level for last several months and dropped 0.2% in November. The main reason behind low inflation is weak aggregate demand together with declining prices in previous periods for commodities on international markets. This year NBG started to gradually withdraw from tightened policy stance. As a result we observe interest rate decline on loans and increased lari lending, which is important factor for stimulation of demand.

Recently, the transmission of external shocks on Georgia's economy has strengthened. The global appreciation of dollar together with the depreciation of Turkish Lira and Euro exchange rate has affected Gel exchange rate with dollar, through expectations and trade channels. On the other hand, the positive trends were observed in exporting sector. For the last few month exports of goods is increasing annually. The growth pattern is also maintained in tourism revenues and remittances.

The NBG will continue to monitor the developments in the economy and financial markets and will use all means and instruments at its disposal in order to ensure the price stability.

The next meeting of the Monetary Policy Committee will be held on 25^th of January 2017.