The FINANCIAL -- July 22, 2011 – At a Monetary Policy Committee meeting on Wednesday the National Bank of Georgia (NBG) cut the refinancing rate 25bp to 7.75%.

Vitaliy Vavryshchuk, Senior Analyst at BG Capital: The NBG gradually hiked its key policy rate from 5.0% to 8.0% since May 2010 on concerns of accelerating inflation. Now that inflation dropped to 10.0% in June (from 14.3% in May) and May economic growth slowed to a critical 1.4% y/y (from 9.7% y/y in January) the regulator changed its stance in favour of loosening monetary policy. We expect the decision will be followed by further cuts given that inflationary pressures are easing (CPI is likely to fall into single digits through end-2011 as this year’s strong harvest keeps agricultural commodity prices moderate) and as the NBG’s efforts shift to stimulating economic growth.

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