The National Bank of Georgia (NBG) 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.
The NBG issued the following statement:
"The Monetary Policy Committee (MPC) of the National Bank of Georgia (NBG) met on September 24, 2014 and decided to keep the refinancing rate unchanged at 4 percent.
Given the analysis of current economic situation and geopolitical factors, the MPC deems necessary to keep accommodative monetary policy. The committee’s assessment is that the exit out of accommodative monetary policy will take place step by step and the speed of this process will depend on the expected inflation and economic activity. According to current forecasts the inflation will reach its target value in the first half of 2015. Unless new shocks affecting the economy will take place, the main policy rate will approach its neutral level and reach 6 percent by the end of 2015.
The real GDP grew by 5.2% in the second quarter and the economic growth in the first half of the year reached 6.0 percent with the domestic demand contributing the most. The economic growth in the first half of the year was more or less consistent with the forecast however the growth in the trade partner countries has been hindered. Given the external risks the economic growth is fragile and there is no pressure on prices from the demand side so far.
The NBG will continue to monitor the developments in the economy and financial markets both domestically and abroad and will use all means and instruments at its disposal to ensure price stability, which is the necessary condition for the long-term high and stable economic growth, low interest rates and high employment.
The next meeting of the Monetary Policy Committee will be held on November 19, 2014."