The Monetary Policy Committee of the National Bank of Georgia decided to keep the monetary policy rate unchanged at 8.25 percent.
In May, annual inflation stood at 5.7 percent, above the 3 percent target. The increase was mainly driven by higher energy prices, which the central bank links to external factors, including volatility in international energy markets and supply-side disruptions.
Core inflation, which excludes food, energy, and tobacco, stood at 3.5 percent in May, while services inflation reached 3.8 percent. The NBG said both indicators remain below headline inflation, although recent trends point to risks of second-round effects.
International commodity markets have recently seen a correction in energy prices. The bank said oil prices have fallen from recent peaks amid expectations of a possible US–Iran peace agreement. This aligns with the NBG’s central scenario, which assumes inflationary pressure from external shocks will gradually ease from the second quarter of 2026.
Under this scenario, inflation is projected to average 4.9 percent in 2026 and gradually return to target in the medium term.
Economic activity remains strong. The economy grew by 6.2 percent in April 2026, while average growth for the first four months of the year reached 8.3 percent. The NBG said high-productivity sectors continue to drive growth, partially offsetting demand-side inflationary pressures.
Global uncertainty remains elevated, with risks linked to developments in the Middle East, international energy prices, and infrastructure disruptions. The Monetary Policy Committee considered both high- and low-inflation risk scenarios.
Under a high-inflation scenario, prolonged geopolitical tensions and supply disruptions could push commodity prices higher and strengthen second-round effects, requiring a tighter monetary policy path.
Under a low-inflation scenario, a potential peace agreement in the Middle East could stabilize commodity prices faster, easing inflation and allowing for quicker normalization of monetary policy.
The NBG said Georgia’s external position remains stable, supported by strong FX inflows and a low sovereign risk premium. A relatively weak US dollar also continues to support external stability.
As a result, the Monetary Policy Committee kept the rate unchanged at 8.25 percent. The bank said it will continue monitoring risks closely and will adjust policy if inflationary pressures intensify. Once the external shock fades, it expects a gradual normalization of monetary policy.
The next Monetary Policy Committee meeting will be held on July 29, 2026.
