OREANDA-NEWS. The Monetary Policy Committee of the National Bank of Georgia (NBG) met on August 14, 2013 and decided to reduce the refinancing rate by 25 basis points to 3.75 percent.

Prices continued to decline in July, with the annual CPI inflation reaching -0.2% and monthly inflation dropping to -1.3%. The main driver of such price dynamics was the seasonal decrease in fruit and vegetable prices. The base effect also played a significant role. According to existing forecasts, inflation will remain low throughout this year and will approach its target value in the second half of 2014. The preliminary estimates of the NBG suggest that economic growth in the second quarter of the year was 1.8%. Given the decrease in interest rates, the demand for loans is still modest. According to existing forecasts, economic activity will somewhat improve in the second half of the year, due to, inter alia, expected fiscal activity, thus reducing deflationary pressures.

Given that existing forecasts predict inflation to remain below the target level in the medium term, the NBG decided to continue monetary easing and to reduce the Monetary Policy Rate.

The next meeting of the Monetary Policy Committee will be held on September 25, 2013.