Nat'l Bank of Georgia cuts refinancing rate
TBILISI. July 21 (Interfax) - The National Bank of Georgia's monetary policy committee has decided to lower the refinancing rate 25 basis points to 7.75% per annum as of July 21, a press release issued by the bank says.
The committee, which meets on a monthly basis, has only raised the rate or left it alone since November of 2009.
Last month, consumer prices in Georgia decreased 4% from the previous month, as a result of which year-on-year inflation was 10% in June.
"The decrease on the consumer price index [in June versus May] was expected, although the dynamics of the recent period indicated an inflationary slowdown at more rapid rates than supposed," the statement says.
According to the forecasts, inflation might slip under the targeted level at the start of next year. "Judging by this, it is appropriate to start easing monetary policy in timely fashion, so that the inflation indicator will in the middle-term period remain at the targeted level," the National Bank said.
This rate cut is the first step in that direction. "If during the coming months there continues to be a slowing of inflation with a weakening of overall demand, the National Bank will continue to ease policy," the release says.
With the aim of spurring commercial banks to long-term financing, the committee has decided to cut the provisioning rules for long-term credit funds. In particular, credits in the national currency tenge lent for more than one year and in tenge for more than two years will be freed of reserve requirements, and for credit funds in tenge lent for from one to two years the requirement will go down to 5%.
The statement notes that world oil prices have slumped recently. "Moreover, Russia and Ukraine lifted the embargo on exporting wheat in June, which, as expected, will tell on a reduction in Georgia of prices for baked goods," the Bank said.
The influence of external factors that over the past year have prompted high inflation is gradually decreasing, the statement says. "As a result, a sharp inflationary slowdown is expected in the third quarter," it says.
The Georgian government hiked its inflation forecast for this year from 7% to 8% early this past April. The National Bank expects 7.5% inflation for 2011.