The National Bank of Georgia (NBG) increased its main policy rate by 25 basis points to 4% on February 12, saying “there is no further need to retain an accommodative monetary policy” due to recent trends in economy.

This is the first upward revision in two and a half years during which the key rate saw decline from 8% to 3.75% – the lowest rate since January 2008, when Georgia’s central bank launched setting of monthly refinancing rate.

Annual inflation was 2.9% in January, up from 2.4% figure recorded in December. Government’s forecast for 2014 end of the year annual inflation is 3.5%, according to the state budget.

The central bank said that inflation is expected to reach its target level in the second half of 2014.

It said that economic growth gathered speed in recent months, mainly due to increase in domestic demand, and this trend is expected to continue in the first half of 2014. It also noted 16% increase in banks’ loan portfolio.

“Preliminary indicators, as measured in January, also point towards the retention of this trend,” the central bank said, adding that with increase of its key rate it started withdrawal of the accommodative monetary policy, “provided that the aforementioned trends are maintained” in coming months.