Georgia cuts rate for 5th time, inflation to remain too low

    Georgia's central bank cut its rate by another 25 basis points to 3.75 percent, the central bank's fifth rate cut this year, as inflation is forecast to remain below the bank's target level in the medium term.
    The National Bank of Georgia (NBG) said prices continued to decline in July due to a seasonal decrease in fruit and vegetable prices, along with the impact of a base effect, and inflation is first forecast to approach the bank's target range in the second half of 2014.
    Georgia's consumer prices dropped by 0.2 percent in July, consolidating the deflationary trend in the last 18 months. The central bank targets inflation of 6 percent.
    The central bank started its easing cycle in July 2011 and has cut rates by 425 basis points since then. This year it has cut rates by 150 basis points.
    Preliminary estimates suggest that Georgia's economy expanded by 1.8 percent in the second quarter and the bank said economic activity is projected to "somewhat improve in the second half of the year, due to, inter alia, expected fiscal activity, thus reducing deflationary pressures."
    In the first quarter, Georgia's Gross Domestic Product expanded by an annual 2.4 percent, down from 2.8 percent in the previous quarter and 7.5 percent in the third quarter of 2012.

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