The National Bank of Georgia (NBG) began tightening its policy in February but since then it has held back from further tightening in light of increased risks that impacted domestic and external demand and slowed the process of inflation reaching its 6.0 percent target.
The NBG said its latest forecast sees inflation reaching its target by the end of 2015.
In October Georgia's headline inflation rate eased to 3.4 percent from 4.8 percent in September.
The National Bank of Georgia issued the following statement:
"The Monetary Policy Committee (MPC) of the National Bank of Georgia (NBG) met on November 19, 2014 and decided to keep the refinancing rate unchanged at 4 percent.
Inflation forecast has been revised downward as new information had been released since the previous MPC meeting. This was mostly related to the processes taking place in the region and in trade partners of Georgia as well as price decrease on world commodity markets. Therefore, in order to meet the inflation target the committee decided to keep the policy rate unchanged at this stage.
Despite the lower inflation forecast, in the medium term the gradual exit out of accommodative monetary policy is still necessary. According to the updated forecasts the inflation will reach its target value by the end of 2015. The annual inflation in October was 3.4%.
According to preliminary estimates the real GDP grew by 5.5% in the third quarter 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 NBG 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 next meeting of the Monetary Policy Committee will be held on December 17, 2014. "