The Monetary Policy Committee (MPC) of the National Bank of Georgia (NBG) met on December 22, 2010 and decided to keep its Main Policy Rate (the refinancing rate) unchanged at 7.5 percent.
Annual inflation reached 10.5 percent in November. The contribution of food in total CPI was around 9.1 percentage points. Annual price increase for services is 0.6%, which indicates the low inflationary pressure from the demand side. NBG’s inflation forecast hasn't changed since the previous meeting of the Monetary Policy Committee.
The annual growth rate of monetary aggregates has recently shown the tendency to decline. It is expected that by the end of the year the annual growth rate of broad money will decrease even more. The bank loans extended to the economy continues to increase. In the recent period the foreign exchange loans have particularly grown.
The National Bank continues monetary policy tightening. To that end it was decided to increase the reserve requirements for foreign exchange liabilities gradually up to 15%. The first stage involves the increase of the ratio to 10% by January 20th, 2011. The increase in the reserve requirements does not apply to capital and equated long-term assets. At the same time the National Bank will consider measures to stimulate long-term resources.
In order to support the development of the money market the National Bank will decrease the interest rate corridor from 4 to 3 percentage points. Namely, the interest rate on overnight loans/deposits will be determined as the policy rate plus/minus 1.5 percentage points. This step will promote further decrease of the interbank interest rate volatility and deepening of money market.
The NBG will closely monitor developments in the economy and financial markets and will in due course act accordingly.
The next meeting of the Monetary Policy Committee will take place on January 18, 2011.