The FINANCIAL -- The Monetary Policy Committee of the National Bank of Georgia met on January 18, 2012 and decided to lower its Main Policy Rate
by 25 basis points to 6.5 percent,according to National Bank of Georgia .
Annual inflation remained low in December, at 1.9 percent. Core inflation is still low as well, amounting to 0.4 percent.
According to the existing forecasts, inflation is expected to remain low in the first half of the year. Starting in summer this trend is expected to be changed, although the inflation rate will remain below the target.
The trade deficit keeps increasing in the recent period, mostly due to the increase in imports. Since August last year the real exchange rate had been appreciating, the trend that was reversed during last two months.
The expected decline in the economic activity of EU countries will have a negative impact on the trade balance of Georgia, which will possibly result in additional weakening of the aggregate demand in the country.
Existing forecasts indicate that given the unchanged policy stance, the inflation rate will remain below the target. Hence the Monetary Policy Committee of the NBG considered it appropriate to continue easing the monetary policy and decided to decrease the refinancing rate by 25 basis points. The National Bank of Georgia considers that at present the recent monetary easing will be sufficient to keep the inflation in the medium term at the target level.
The NBG will continue to monitor the developments in the economy and financial markets and will act accordingly.
The next meeting of the Monetary Policy Committee will be held on February 15, 2012.
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