On July 29, 2026, the Monetary Policy Committee of the National Bank of Georgia decided to keep the monetary policy rate unchanged. The monetary policy rate stands at 8.25 percent.

In June 2026, headline inflation in Georgia stood at 5.8 percent. Inflation above the target level is still primarily driven by higher energy prices. Amid the renewed escalation of geopolitical tensions in the Middle East, volatility in international oil prices has increased again. However, current market trends indicate that oil prices remain below the levels observed during the previous escalation. At the same time, the prolonged conflict has heightened the risk of indirect inflationary effects stemming from higher energy prices. The sticky inflation indicator, which better captures underlying inflationary dynamics and inflation expectations, has remained close to the target. Specifically, in June, core inflation (excluding food, energy, and tobacco) stood at 3.2 percent. However, service sector inflation accelerated to 4.1 percent, indicating that despite the moderate level of core inflation, the risks of strengthening second-round effects remain a noteworthy factor.

According to the NBG's updated central scenario, energy prices are expected to remain a significant contributor to inflation this year. Consequently, average inflation is projected at 5.2 percent in 2026. From the second half of 2026 onwards, inflation is expected to decline gradually and converge to the 3 percent target over the medium term.

Economic activity has remained resilient in the face of external shocks. In May 2026, based on the preliminary data, economic growth stood at 6.4 percent, while average growth for the first five months of the year reached 7.8 percent. Growth continues to be driven primarily by high-productivity, service-oriented sectors, which mitigates demand-side inflationary pressures. At the same time, in line with expectations, the adverse impact of the ongoing conflict in the Middle East on external demand has remained limited. Accordingly, under the updated central scenario, the forecast for Georgia's economic growth in 2026 remains unchanged at 6.5 percent.

The geopolitical situation and its economic consequences remain one of the main risks shaping the outlook for the global economy. Against the backdrop of heightened uncertainty, in addition to the central scenario, the MPC considered both high-inflation and low-inflation risk scenarios.

In the event of the realization of the high-inflation risk scenario, fundamental processes require a higher trajectory of the monetary policy rate than the central scenario. The high-inflation scenario assumes a more prolonged escalation of geopolitical tensions, resulting in a further increase in energy prices on international commodity markets. Higher energy prices will be reflected in higher domestic fuel prices and will also be transmitted to the prices of other goods and services through increased transportation and production costs. In addition, recent adverse weather conditions pose an additional risk of higher international food commodity prices. In the event of the realization of these risks, inflation would be higher compared to the central scenario.

On the other hand, under the low-inflation risk scenario considered by the MPC, the realization of the risks would allow a faster normalization of monetary policy rate compared to the central scenario. In recent years, structural changes in the economy have increased the contribution of relatively high-productivity and less import-intensive sectors, which has strengthened Georgia’s external position. According to the central scenario, this trend is expected to normalize gradually, although there is a possibility that it could persist over the longer term. In such a scenario, on the one hand, higher long term potential growth would reduce demand-side inflationary pressures. On the other hand, a stronger external position and a lower sovereign risk premium would support a fundamental appreciation of the real effective exchange rate, further strengthening disinflationary impact. Furthermore, a rapid de-escalation of geopolitical tensions, leading to a faster decline in energy prices, would represent another key driver of the low-inflation scenario. As a result, headline inflation would converge to the target more rapidly than in the central scenario.

Based on its assessment of the current macroeconomic environment, the updated scenarios, and the balance of risks, the MPC considered it appropriate at this stage to keep the monetary policy rate unchanged. However, given the elevated inflationary risks, the tightened monetary policy stance is expected to be maintained for an extended period. The NBG continues to closely monitor the transmission of external shocks to the Georgian economy and their impact. Should inflationary risks, including second-round effects and inflation expectations, intensify beyond current expectations, the NBG stands ready to tighten monetary policy further. The monetary policy response aims to ensure that, once the supply-side inflationary shock dissipates, inflation returns to the 3 percent target in a timely manner.

The next meeting of the Monetary Policy Committee will be held on September 9, 2026.