On November 5, 2025, the Monetary Policy Committee of the National Bank of Georgia (NBG) decided to keep the monetary policy rate (refinancing rate) unchanged. The monetary policy rate stands at 8 per cent.
According to the NBG, the overall price level in Georgia increased by 5.2 per cent year-on-year as of October 2025.
The increase in inflation relative to the 3% target was mainly driven by food price inflation, which partly reflected the low base effect from the previous year and the impact of exogenous factors. However, inflation excluding food prices, as well as other measures of relatively sticky prices that better reflect long-term inflation expectations, have remained close to the target level.
The NBG went on to say that core inflation, which excludes from the consumer basket the most volatile components, such as food, energy, and tobacco, remained below the 3% target, standing at 2.4% in October in particular. At the same time, service sector inflation remained near the target, at 2.5 per cent.
Meanwhile, prices of imported goods remain low (0%), largely reflecting the year-on-year decline in fuel prices.
Despite these developments, the sustained high level of inflation in relatively flexible prices, primarily food, warrants attention due to potential risks to inflation expectations.
According to the NBG’s updated central scenario, the inflation forecast for 2025-2026 has been revised slightly upwards, largely due to high food inflation.
According to the current central forecast, inflation will average around 4% in 2025 and decrease to 3.5% in 2026. Other things being equal, elevated food prices are expected to have only a temporary impact on inflation, with their effects gradually fading. The central scenario precisely envisages such a development. In particular, the abovementioned dynamics are temporary in nature and are not expected to create second-round effects, which means that the associated price pressures do not spill over to the prices of other goods and services.
At the same time, economic activity is gradually converging toward its long-term potential, thereby moderating demand-side pressures on prices.
According to preliminary data, economic growth reached 7.7 per cent between January and September 2025. The realignment of aggregate demand towards its long-term trend is further supported by sustained tight financial conditions, as evidenced by prevailing market interest rates.
Given the high uncertainty, upside risks to inflation are more pronounced, while downside risks remain.
Accordingly, the Monetary Policy Committee considered both high-inflation and low-inflation risk scenarios, along with the central scenario, and the risks operating in different directions were taken into account in the decision-making process.
The high-inflation risk scenario that the MPC considered, on the one hand, assumes the realisation of global inflationary risks. In particular, the re-escalation of U.S. tariff policies is likely to intensify global fragmentation more than previously anticipated, potentially adversely affecting supply chains. This heightens the risk of further price increases for certain commodities in international markets. Beyond tariff policy, the threat of renewed geopolitical tensions remains a significant concern, as it can substantially influence global commodity prices.
The high-inflation scenario, alongside external factors, also considers the realisation of domestic economic risks. In particular, if inflation persists above the target for an extended period, this could heighten inflationary expectations. Simultaneously, if aggregate demand remains above its potential level, demand-side pressures on prices are likely to intensify. The emergence of these risks would necessitate an increase in the policy rate.
On the other hand, the Monetary Policy Committee considered a low-inflation risk scenario, where the realisation of the risks would shape the development of fundamental factors in a way that requires a lower trajectory of the monetary policy rate compared to the central scenario. In particular, this scenario, in line with forecasts by international organisations, anticipates a marked decline in oil prices in international commodity markets, reflecting both an increase in supply and a slowdown in global demand.
At the same time, the U.S. dollar index (DXY) is expected to remain relatively weak globally for longer than initially anticipated, helping to reduce headline inflation through lower imported prices. Furthermore, developments in the domestic labour market are exerting downward pressure on prices, increasing the likelihood of a transition to a low-inflation scenario.
Following a macroeconomic analysis and an assessment of the scenarios outlined above, the Monetary Policy Committee has deemed it appropriate to retain a moderately tight monetary policy stance, keeping the policy rate steady at 8 per cent. Future decisions regarding the policy rate will be based on updated data and the evolving risks. Should the impact of one-off factors on inflation persist for an extended period, the Committee is prepared to maintain the current tight stance for longer than initially anticipated and, if necessary, to tighten it further.
The NBG will utilise all available instruments to uphold price stability. This entails maintaining the overall rate of price increase close to the 3 per cent target over the medium term.
The next meeting of the Monetary Policy Committee is scheduled for December 17, 2025.
