The Monetary Policy Committee (MPC) of the National Bank of Georgia (NBG) met on April 13th, 2011 and decided to keep its Main Policy Rate (the refinancing rate) unchanged at 8 percent.

Consumer prices did not change in March 2011 and remained at the February level. Annual inflation reached 13.9 percent in March. The rise in prices of fuel and fruits was compensated by the decline in prices of cheese and vegetables. The effect of higher prices of food and fuel in recent months is still having substantial impact on annual inflation. This is due to the hike in the world market prices. Annual base inflation (excluding food and fuel) was equal to 2.2 percent in March and annual inflation in the service sector – 2.1 percent. Existing information does not suggest increasing inflation expectations. The current level of inflation will persist for several months and will decline thereafter. 

The tightening of the monetary policy in the second half of 2010 and in the beginning of 2011 has already been partially transmitted to the real economy. This is signaled by a steep decline of the broad money growth rates.

It should also be mentioned that the Government of Georgia is continuing the policy of fiscal consolidation. According to the last amendment in the state budget, the government decreased its effect on reserve money by 100 million GEL during the year.

Having in mind the previous tightening of the monetary policy and the ongoing fiscal consolidation, the MPC deemed it unnecessary to further tighten the monetary policy. The NBG will closely monitor 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 25th, 2011.