On October 23, 2024, 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 percent.
Georgia continues to maintain a low-inflation environment. Since the start of 2023, inflation has consistently remained below the 3 percent target. In September of this year, headline inflation was recorded 0.6 percent, with core inflation at 0.8 percent. The price stability is largely attributed to the NBG’s effective monetary policy, which involved timely tightening followed by gradual normalization, stabilizing long-term inflation expectations. Domestic inflation, which reflects these expectations most accurately, is currently below the 3 percent target. Additionally, increased competition in the economy has reduced firms’ profit margins, further supporting low inflation. Together, these factors have helped neutralize inflationary pressures from strong demand. Economic growth has exceeded expectations this year, leading to a revised growth forecast of 8.5 percent. However, the NBG estimates that the economy’s overall production potential has also increased, easing pressures on prices and contributing to the low-inflation environment. According to the NBG's updated forecast, all else being equal, inflation is expected to remain below the target level in 2024, averaging around 1.2 percent, before stabilizing around 3 percent in the medium term.
Despite these positive developments, heightened uncertainty—both domestically and globally—continues to pose risks. Against the backdrop of ongoing hostilities in Ukraine and elevated geopolitical tensions in the Middle East, there may be, among other effects, a rise in regional risk premium, creating price pressures through various channels. Additionally, volatility in international oil and food prices has increased, while developments in the Red Sea region may raise shipping costs, further elevating risks to overall inflation through higher costs for imported goods. Beyond external factors, domestic economic activity is stronger than expected, which could also exert upward pressure on prices in the future. Based on the current analysis of domestic and external conditions, the NBG has maintained the monetary policy rate unchanged at 8.0 percent. Such a cautious approach to the normalization of monetary policy is important to keeping inflation close to its target in the medium term. If inflationary risks do not materialize and the severity of inflationary pressures diminishes, the NBG will continue to vigilantly reduce the policy rate to its neutral level. Conversely, if inflationary pressures resurface, tightening the policy stance or maintaining the current rate for a longer period may be necessary.
The National Bank of Georgia continuously monitors ongoing economic processes and financial markets and will use all available tools to ensure price stability.
The next meeting of the Monetary Policy Committee will be held on December 18, 2024.
