The Monetary Policy Committee (MPC) of the National Bank of Georgia (NBG) met on April 15, 2009 and decided to lower its main policy rate (the refinancing rate), by 50 basis points, to 6 percent.

The annual rate of inflation decreased to 1.6 percent in March.  As a result, average annual inflation stands at 7.8 percent. Existing forecasts have not changed considerably since the Committee’s last meeting, according to which the inflation rate is expected to stay below the target. Downside risks to prices are significant. Inflation expectations remain low and core inflation is continuing to decline.

The growth rates in monetary aggregates remain negative, a likely indicator of the slowdown in overall economic activity. 

After the introduction of foreign exchange auctions by the National Bank of Georgia at the beginning of March, increased flexibility in the exchange rate has been introduced, that reduced speculative pressures on the foreign exchange market. As was expected, activity in the direct foreign exchange market has increased markedly over the last month, which is aiding the development of the abovementioned market.  Even though the inflow of foreign currency including via money transfers into the country has decreased compared to the same period last year, the volume of imports has slowed at a faster pace, which has reduced pressure on the exchange rate.

Energy prices on the international markets have stabilized over the last month.  There are signs that the U.S. economic downturn is easing.  Despite the appearance of some positive signals, still significant uncertainty remains about the prospects for global economic growth.

The NBG will closely monitor current developments in the economy and financial markets and will in due course act accordingly.

The next meeting of the Monetary Policy Committee will take place on May 13, 2009.