- Decision
- Maintain
- Rate change
- 0 bps
- monetary policy rate
- 8.25%
The National Bank of Georgia (NBG) held its monetary policy rate at 8.25%, maintaining a moderately tight stance to contain risks to inflation expectations and second-round effects amid persistent supply pressures and stronger-than-expected growth. The rate has remained unchanged since a 25-basis-point increase from 8% in May. The NBG raised its central inflation forecast for 2026 to 5.4%, with inflation expected, all else equal, to gradually converge toward the 3% target from the second half of 2027. Core and services inflation remained below headline inflation, indicating that the supply shock’s impact on expectations was still moderate. The NBG also raised its 2026 growth forecast to 7.2%, noting that high-productivity sectors continued to drive activity and offset demand-side inflationary pressures. Prolonged Middle East tensions, higher energy prices and disruptions to international shipping continued to increase production and transportation costs. The central bank signalled further moderate rate increases if the prolonged supply shock pushes inflation expectations upward and amplifies second-round effects, followed by gradual policy normalization once the inflationary shock dissipates.
Rate evolution
The National Bank of Georgia kept the policy rate at 8.0% from June 2025 before raising it by 25 basis points to 8.25% in May 2026 as external inflation shocks intensified, and left it unchanged on June 17, July 29, September 9 and October 21. It judged a moderately tight stance appropriate as annual inflation stood at 5.6% in September, with energy prices contributing approximately 2 percentage points, while core and services inflation of 3.5% and 3.7%, respectively, indicated that the supply shock’s impact on inflation expectations remained moderate. Economic activity remained stronger than expected, with growth at 6.3% in August and averaging 7.6% in the first eight months of 2026, while high-productivity sectors offset demand-side 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 prolonged Middle East tensions increased energy, production and transportation costs, raising the risk that persistent supply shocks would lift inflation expectations and amplify second-round effects. Its updated central scenario raised projected average annual inflation for 2026 by 0.2 percentage points to 5.4% and envisaged gradual convergence toward the 3% target from the second half of 2027, with inflation averaging 3.5% that year, while the National Bank of Georgia signalled further moderate rate increases if the prolonged supply shock lifted inflation expectations and gradual policy normalization once the shock dissipated.