Wednesday, June 18, 2014

Georgia holds rate, inflation moves close to forecast

    Georgia's central bank held its monetary policy rate steady at 4.0 percent, saying inflation is moving closer to the meeting the bank's forecast of 5-6 percent inflation in the second half of the year.
    The National Bank of Georgia (NBG) raised its rate by 25 basis points in February but held it steady in March and May due to the geopolitical risks from the conflict between Ukraine and Russia.
    Last year the bank cut its policy rate by 150 basis points and has made it clear that it wants to exit its current accommodative stance.
    However, the bank said recent forecasts suggest that the process of exiting its accommodative policy stance will take longer time than originally planned.
    The bank said export growth had shown a decreasing trend, indicating weakening external demand, and the growth of credit was low, reflecting weak domestic demand.
    "Economic revival at a less than expected rate is the main risk factor for achieving the target inflation," the central bank said.
    Georgia's headline inflation rate eased to 2.4 percent in May from 3.4 percent. The country experienced deflation in most of 2012 and 2013. The central bank targets inflation of 6.0 percent and in April forecast inflation of between 5 and 6 percent in the second half of this year.


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