NBG Keeps Key Refinancing Rate Unchanged at 8%
On November 5, the Monetary Policy Committee of the National Bank of Georgia (NBG) decided to keep its key refinancing rate unchanged at 8%, maintaining what it called “a moderately tight monetary policy.” The Central Bank has not adjusted the rate since May 2024.
The NBG said that the annual inflation amounted to 5.2% in October, driven primarily by increases in food prices. It attributed this to last year’s “low base effect” and external factors. The Bank noted that the core inflation, which excludes food, energy, and tobacco, stood at 2.4% in October, below the 3% target, but warned that “the prolonged high level of inflation in relatively flexible prices (mainly food) requires attention regarding potential risks to inflation expectations.”
The Bank said it had slightly revised its inflation forecast upward for 2025-2026, citing high food inflation, projecting 4% in 2025 and 3.5% in 2026. However, it stressed that food prices are expected to have only a “temporary impact” with no “second-round effects” likely to spill over to other goods and services.
It also noted that economic activity is gradually converging toward its long-term potential, citing Geostat’s preliminary data of January-September 2025, which showed that the average real GDP growth for January-September 2025 equaled 7.7%. “The normalization of aggregate demand toward its long-run trend is further supported by the maintenance of tight financial conditions, as reflected in prevailing market interest rates,” the statement added.
The Monetary Policy Committee outlined two alternative risk scenarios that could affect future policy decisions.
The high-inflation scenario envisions potential global and domestic risks – such as a re-escalation of U.S. tariff policies disrupting supply chains, geopolitical tensions driving up global commodity prices, or stronger domestic demand that would require a tightening of the policy rate.
Conversely, a low-inflation scenario assumes a marked decline in oil prices, a weaker U.S. dollar reducing imported inflation, and domestic labor market developments placing downward pressure on prices, all of which could support a softer policy stance.
“If the impact of one-off factors on inflation is prolonged, the Monetary Policy Committee stands ready to maintain the current tight stance for longer than expected and, if necessary, to tighten it further,” the NBG said.
The next Monetary Policy Committee meeting will be held on December 17, 2025.
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