Georgia's central bank holds rate at 8.25% with inflation at 5.6%

The National Bank of Georgia kept its monetary policy rate at 8.25 per cent on 9 September, saying a supply-driven rise in inflation, led by energy prices, requires monitoring for second-round effects, according to its decision statement. The rate was last changed on 6 May, when it was raised by 25 basis points from 8.00 per cent, the bank's decisions log shows. It has been unchanged at the June, July and September meetings.

Headline inflation was 5.6 per cent in August, above the bank's 3 per cent target. The bank attributed the deviation largely to supply shocks, with renewed geopolitical tension in the Middle East raising energy prices and heightening uncertainty over supply, and with food price pressure from international markets intensifying, according to the statement. Core inflation was 3.6 per cent and services inflation 4.4 per cent, both below the headline rate, which the bank read as a sign that the impact on inflation expectations has so far been moderate.

The central scenario projects average annual inflation of about 5.2 per cent in 2026 before a gradual return to 3 per cent over the medium term, the statement said. Recent inflation dynamics are broadly in line with that forecast. Growth remains strong: preliminary data show economic growth of 8.0 per cent in July and an average of 7.9 per cent over the first seven months of the year.

Two scenarios and the guidance

The committee weighed a high-inflation and a low-inflation scenario alongside the central one. In the high-inflation case, longer geopolitical tension and higher international food prices from adverse climate conditions would affect expectations and amplify second-round effects, requiring a higher policy rate path than the central scenario, according to the statement. In the low-inflation case, structural change that has raised the weight of high-productivity and less import-intensive sectors, an improved external position and a lower sovereign risk premium would support a stronger fundamental exchange rate and allow a faster normalisation of the policy rate.

The bank described its stance as moderately tight. If prolonged supply shocks push up inflation expectations, "the MPC will continue to increase the monetary policy rate moderately", the statement said. Once the shock dissipates, the bank said it will gradually begin to normalise policy.

Reserves and ratings

The central bank has been building a larger buffer. Gross international reserves reached an all-time high of $8.14 billion at the end of August, up 56.4 per cent from a year earlier and $613 million from July, the bank said on 7 September. Reserves stood at 128.2 per cent on the International Monetary Fund's ARA adequacy metric, above the 100 per cent threshold. Net foreign exchange purchases totalled $2,566.6 million from January to July, and monetary gold of $1,149.2 million accounted for 14.1 per cent of reserves.

S&P Global Ratings affirmed Georgia's sovereign rating at BB and raised the outlook to positive on 8 August, citing reserve accumulation among the drivers, according to the National Bank's summary of the action. The summary said S&P noted a current account deficit of 2.6 per cent of GDP in 2025, down from more than 10 per cent a decade ago, and described the banking system as well capitalised, highly liquid and profitable. S&P forecast average inflation of 5.1 per cent and growth of 6.4 per cent for 2026.

Capital market and the next meeting

The bank's twice-yearly Capital Market Review, published on 15 September with data as of the second quarter, focuses on local government and publicly issued corporate bonds, covering market structure, the investor base, ownership and secondary-market activity.

Corporate issuance continues on a small scale. Microfinance organisation Rico Express placed the first $10 million tranche of a $100 million public bond programme with the support of TBC Capital, according to a National Bank release dated 25 September. The company's supervisory board chairman, Lasha Nikolaishvili, said it placed three-year bonds at 7 per cent. First Vice-Governor Ekaterine Mikabadze said investors have more opportunities to place savings and the private sector has access to alternative funding, and that market activity remains high this year.

The Monetary Policy Committee meets next on 21 October, the bank said.