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%.

Annual inflation remains below the target level of 3%. In February 2025, the overall price level increased by 2.4% year-on-year, while core inflation stood at 2.0%. Inflation for domestically produced goods and services, which tend to be stickier and better reflects long-term inflation expectations, remains aligned with the target level, reaching 3.0% in February. Compared to previous months, the moderate increase in inflation and its convergence toward the target can be attributed, on the one hand, to the realization of risks in international markets. Specifically, the increase in international food commodity prices has been partly passed on to the domestic market, leading to a slight rise in inflation compared to the previous month. On the other hand, the moderate increase in inflation is related to the fading base effect of the reduction in electricity tariffs.

Notably, based on data from January-February 2025, current dynamics are largely in line with the central scenario assumptions of the NBG’s latest forecast. Against the backdrop of increased pressure from international markets, inflation is gradually converging toward the target level and is expected to be close to it in the first half of 2025. Subsequently, partly due to the base effect, inflation will temporarily exceed the target before stabilizing around 3% in the medium term. However, economic activity appears stronger than initially expected. According to preliminary data, economic growth in January stood at 11.1%. At this stage, according to the latest estimates from the NBG, economic potential remains high, alongside strong aggregate demand, which partially offsets demand pressures on prices. Robust aggregate demand is also supported by credit activity, primarily driven by business loans, which contribute positively to economic potential growth.

Amid elevated global uncertainty, the Monetary Policy Committee has, on one hand, considered a high-inflation risk scenario, where the realization of fundamental factors would require a higher path for the policy rate compared to the central scenario. Recently rising global uncertainty has been largely driven by tariff policies in international markets. Such policies highlight signs of economic fragmentation at the international level, intensifying the likelihood of supply chain disruptions and the emergence of a global high-inflation environment. On the domestic front, demand-driven price pressures remain a notable concern.

On the other hand, the Monetary Policy Committee has considered a low-inflation risk scenario, where the realization of fundamental factors would require a lower trajectory for the monetary policy rate compared to the central scenario. In the wake of global uncertainty and tariff policies, the USD index is weakening. Against this backdrop, the appreciated exchange rate will exert downward pressure on headline inflation through imported goods inflation.

As a result of macroeconomic analysis and the assessment of existing risks, the Monetary Policy Committee has considered it optimal to adopt a cautious approach toward further normalizing the monetary policy rate, keeping it unchanged at 8%. Upcoming decisions on the monetary policy rate will depend on updated macroeconomic forecast scenarios and risk assessments.

The NBG will use all available instruments to maintain price stability. This means keeping the overall price level increase close to the 3% target over the medium term. The next meeting of the Monetary Policy Committee will be held on May 7, 2025.