The Monetary Policy Committee (MPC) of the National Bank of Georgia (NBG) met on March 16th, 2011 and decided to keep its Main Policy Rate (the refinancing rate) unchanged at 8 percent.

Annual inflation reached 13.7 percent in February 2011. In the month of February consumer prices grew by 2.8 percent. As in the recent months, the inflation in February was caused mainly by the increase in food prices, accounting for the 12.4 percentage points of the total annual inflation. At the same time the prices in the services’ sector grew only by 1.9 percent. The inflation caused by the external shocks is a temporary phenomenon and according to the current forecasts it is expected that the inflation rate will start decreasing in several months’ time.

The monetary tightening pursued recently by the National Bank has already started to influence the economy, which was reflected in the decrease of both GEL and foreign currency loans’ growth rates. As a result the seasonally adjusted growth rate of broad money aggregates has been close to zero since the beginning of the year, whereas respective annual growth rates have been decreasing.

Recently the prices for certain food products (wheat and sugar) and oil prices on the world markets have been slightly declining. In case such trend will prevail the consumer prices in Georgia are expected to decrease.

Based on the aforementioned, the Monetary Policy Committee decided at present not to tighten the monetary policy further. 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 April 13th, 2011.