- Decision
- Maintain
- Rate change
- 0 bps
- monetary policy rate
- 8.25%
The Monetary Policy Committee of the National Bank of Georgia (NBG) left the monetary policy rate unchanged at 8.25% on July 29, citing inflation still above target and elevated inflationary risks even as economic activity remained resilient; after raising the rate by 25 bp to 8.25% in May from 8.0%, the NBG has kept it unchanged since June. June headline inflation stood at 5.8%, above the 3% target, mainly due to higher energy prices, while core inflation was 3.2% and services inflation accelerated to 4.1%, indicating that second-round risks remain noteworthy despite sticky inflation staying close to target. In the NBG’s updated central scenario, energy prices remain a significant contributor to inflation this year, average inflation is projected at 5.2% in 2026, and inflation is expected to decline gradually from the second half of 2026 and converge to target over the medium term. Economic growth stayed strong at 6.4% in May and 7.8% on average in the first five months of the year, and the 2026 growth forecast was left unchanged at 6.5%, with growth driven mainly by high-productivity, service-oriented sectors that mitigate demand-side inflationary pressures. The NBG said renewed escalation of geopolitical tensions in the Middle East had increased volatility in international oil prices, though current market trends indicate prices remain below levels seen during the previous escalation, and it signalled that the tightened policy stance is likely to be maintained for an extended period, with further tightening possible if inflationary risks, including second-round effects and inflation expectations, intensify.
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.