- Decision
- Raise
- Rate change
- 25 bps
- monetary policy rate
- 8.25%
The Monetary Policy Committee of the National Bank of Georgia lifted the refinancing rate by 25 bp to 8.25 % on 6 May 2026, judging that the Middle East conflict, costlier global energy and shipping bottlenecks through the Strait of Hormuz have generated a fresh supply-side shock that pushed headline inflation to 5.9 % in April, well above the 3 % goal, while core and services inflation quickened to 3.2 % and 3.7 %. After keeping the rate at 8.0 % since January 2025, this first increase seeks to pre-empt second-round effects and reinforce well-anchored expectations. Domestic conditions remain strong: GDP expanded by 10.7 % y/y in March and 9.1 % in Q1, with high-productivity sectors cushioning demand-driven price pressures. The central bank highlighted heightened external inflation risks from elevated commodity prices and potential supply-chain strains, and said it stands ready to tighten further if shocks prove more persistent, while committing to begin a gradual policy normalization once inflation is on track to return to target.
Rate evolution
From June 2025 to September 2026, the National Bank of Georgia kept the policy rate at 8.0% for most of the period before raising it by 25 basis points to 8.25% in May 2026 as external inflation shocks intensified, and it left the rate unchanged on June 17, July 29 and September 9. It judged a moderately tight stance appropriate because inflation remained above the 3% target, with headline inflation at 5.6% in August as energy and international food price pressures persisted, while core inflation stood at 3.6% and services inflation at 4.4%, suggesting a moderate impact on inflation expectations. Economic activity remained strong, with growth at 8.0% in July and averaging 7.9% in the first seven months of 2026, while high-productivity sectors partly offset demand-driven inflationary pressures.
Risks were initially framed as two-sided, with upside threats from tariffs, tensions in the Middle East, oil prices and supply disruptions offset by a weak U.S. dollar, lower imported inflation, productivity gains and labour-market disinflation, but from late 2025 the National Bank of Georgia said upside risks were more pronounced. After Strait of Hormuz disruptions shifted the outlook into a high-inflation risk scenario in March 2026, it tightened in May and subsequently held the rate as renewed Middle East tensions increased uncertainty over energy supplies and raised the risk that prolonged supply shocks would affect inflation expectations and amplify second-round effects. Its central scenario projected average annual inflation of around 5.2% in 2026 and a gradual return to the 3% target over the medium term, while the National Bank of Georgia signalled further moderate increases if inflation expectations rose and gradual policy normalization once the inflationary shock dissipated.