**NBG Keeps Key Rate Unchanged at 8%**
The Monetary Policy Committee of the National Bank of Georgia (NBG) made a decision on July 30 to keep the key refinancing rate unchanged at 8%. This is the first time in over a year that the NBG has not adjusted the interest rate.
According to the bank, annual inflation stood at 4% in June. The increase was attributed to rising food prices due to developments in international food markets and the base effect from last year’s low inflation. However, inflation expectations remain stable, with service sector inflation holding at 2.3%, below the target of 3%. Core inflation also remained below the target.
The NBG expects inflation in 2025 to temporarily exceed the 3% target, averaging around 3.8%. The bank attributed this performance to enhanced productive capacity, which helps mitigate inflationary pressures stemming from excess aggregate demand. As a result, the NBG revised its 2025 growth forecast upward from 6.7% to 7.4%.
**Economic Uncertainty and Risks**
The central bank noted that global economic uncertainty remains elevated due to ongoing geopolitical tensions. This poses a considerable risk to inflation, particularly in a high-inflation scenario where supply chain disruptions from repeated revisions to U.S. tariff policy could exacerbate fragmentation in the global economy.
Domestically, strong demand also poses inflationary risks that may require a higher interest rate path. On the other hand, in a low-inflation scenario, the bank expects the economy to undergo structural changes with productivity remaining at a relatively high level. This, combined with the weakening of the U.S. dollar index and rapid normalization of international food commodity prices, could exert downward pressure on headline inflation through lower imported inflation.
**Cautious Approach**
As a result of macroeconomic analysis and risk assessment, the Monetary Policy Committee has decided to adopt a cautious approach toward further normalizing the monetary policy rate. The next meeting of the Committee is scheduled for September 10, 2025.
The decision to keep the key refinancing rate unchanged at 8% reflects the bank’s cautious approach to managing economic uncertainty and inflation risks. While growth remains robust, the NBG is taking a wait-and-see attitude, monitoring developments in the global economy and domestic demand.
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