Central Bank Reports 11.2% Inflation

The annual inflation rate as of the end of May was 11.2%, down from 12.3% in March, the National Bank of Georgia (NBG) said.

“Although the current rate of inflation in Georgia is above the comfort zone, it is lower than the inflation rates in several neighboring countries,” the NBG’s Monetary Policy Committee said after meeting on June 25.

The governement has set an 8% annual inflation target for 2008.

The NBG’s Monetary Policy Committee decided on June 25 to keep its key interest rate at 12%. The NBG has raised its benchmark one-week certificate of deposit rate by a total of 5 percentage points since last November to 12% in an effort to slow inflation.

The NBG also said that in the second half of May commercial banks had to “sharply increase” interest rates because of a liquidity shortage in the banking system, following an increased rate of private sector lending.

“The increase in interest rates has not yet influenced, or caused a decline in the growth of private sector lending,” the NBG said.