The National Bank of Georgia (NBG) said on January 18 its monetary policy committee decided to reduce key policy rate by 25 basis points to 6.5% on January 18 as inflation remained “low”.

Annual inflation stood at 2% in December, according to the Georgian state statistics office. Georgia’s annual inflation started slowing down in June after hitting 14.3% in May, 2011.

NBG started to gradually reduce its key policy rate from 8% from July, 2011.

“According to the existing forecasts, inflation is expected to remain low in the first half of the year. Starting in summer this trend is expected to be changed, although the inflation rate will remain below the target,” NBG said in a statement on January 18. “The trade deficit keeps increasing in the recent period… The expected decline in the economic activity of EU countries will have a negative impact on the trade balance of Georgia, which will possibly result in additional weakening of the aggregate demand in the country.”