The Monetary Policy Committee (MPC) of the National Bank of Georgia (NBG) met on October 13, 2009 and decided to keep its main policy rate (the refinancing rate) unchanged at 6 percent.

The annual rate of inflation was 0.4 percent in September and the average annual inflation currently stands at 2.5 percent. As was noted during the Committee’s last meeting, an increase in the annual rate of inflation was expected.  Current forecasts point to a year-end inflation of 3-4 percent.

According to preliminary data, total net profit of the banking sector was GEL7 million in September.  It must be noted that September of the current year is the first month since July, 2008 that the banks ended with a total net profit. An increase in bank lending is expected in the nearest future.

The depreciation of the real effective exchange rate over the last year aided in the reduction of imports and boosted local economic activity, which reduced the trade deficit.    As a result of the funds allocated by the International Monetary Fund and a decrease in foreign exchange interventions, the level of international reserves reached a historical maximum and surpassed USD2 billion in September.

With the easing of the global economic crisis, several nations have begun to toughen their monetary policies (i.e. Australia), although most other nations around the world are not in a hurry to change their expansionary policies that are oriented towards economic stimulus, largely because a long and protracted recovery is expected from the global financial crisis.

The National Bank of Georgia 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 November 25, 2009.