On November 19, the Monetary Policy Committee of the NBG decided to leave the refinancing rate unchanged at the previous level.

Monetary policy rate stads at 4.0 percent.

Following the previous meeting of the Monetary Policy Committee, Inflation forecast has been revised downward as new information had been released. The change in data is mainly due to the processes going on in the region, the countries that are trade partners of Georgia, and decrease in the prices on the world commodity markets.

Therefore, in order to meet the inflation target the committee decided to keep the policy rate unchanged at this stage.

Despite a decline in the inflation forecast, there is still need in a phased abandoning of the accomodative monetary policy.

According to the updated forecasts the inflation will reach its target value (5%) by the end of 2015. The annual inflation in October was 3.4%.

In Q3 the economic growth will be 5.5 percent, according to the preliminary estimates and the preliminary data on the GDP growth in the first three quarters of the year are consistent with the forecasts. The output gap is negative, although it has decreasing trend. The recovery of the domestic demand is also evident from the increase in imports. Importantly, the credit activity keeps growing, with a significant increase in business loans. As for the external demand, it’s still decreasing. According to preliminary data the export dropped by 5.2% in October. Given the worsening situation in the economies of the region, the external demand remains the main risk-factor.

The Monetary Policy Committee of Georgia’s National Bank will hold its next meeting on Dec. 17.

The NBG told that they will continue to monitor the developments in the economy and financial markets and will use all means and instruments at its disposal to ensure price stability.

 The dynamics of further changes in monetary policy will depend on the dynamics of expected inflation, tendencies in economic growth, global and regional economic environment.

The National Bank of Georgia began tightening its policy stance in February when it cut its rate by 25 basis points but since then it has maintained the rate in light of increased risks that affected domestic and external demand and slowed the process of inflation reaching the bank’s target.

NBG conducted 7-days refinancing auction on November 20, 2014. Auction volume amounted to GEL 330 mln and it was allotted to five commercial banks. The minimum interest rate was 4.00%, the maximum – 4.01%, and the weighted average – 4.00%. Refinance Auctions, the Monetary policy instrument, are held weekly, every Thursday.

Nutsa Galumashvili