The National Bank of Georgia has raised its forecast for average annual inflation in 2026 to 5.2%. Previously, the regulator expected that the average price increase during the year would be 4.9%.
According to the monetary policy report, in June, the annual inflation in Georgia was 5.8%, which is nearly twice the National Bank's target indicator.
The regulator assesses that the main reason for exceeding the target level continues to be the rising prices of energy resources due to ongoing instability in the Middle East.
Ongoing conflicts increase the risk of further price hikes for energy resources. At the same time, the National Bank notes that current oil prices remain below the levels recorded during previous escalations.
The regulator also draws attention to the increase in core inflation, which excludes the most volatile categories such as food, energy, and tobacco. In June, core inflation was 3.2%, while inflation in the services sector accelerated to 4.1%.
According to the NBG, this indicates a persistent risk of so-called secondary effects, where the initial increase in fuel and other goods prices spreads to a broader range of services and goods.
According to the National Bank's baseline scenario, inflation is expected to start decreasing in the second half of 2026 and approach the target level of 3% in 2027.
However, the regulator is also considering alternative scenarios.
If the geopolitical situation continues to worsen and global prices for raw materials rise, inflation may exceed the baseline forecast. Conversely, if tensions in international markets ease more quickly, price pressures may decrease, allowing for an earlier transition to interest rate cuts.
At this stage, the regulator has decided to keep the refinancing rate unchanged at 8.25%. This rate was raised to this level in May for the first time in two years against the backdrop of risks arising from the war in the Middle East.
The NBG has stated that under conditions of high inflation risks, it will continue to pursue a relatively strict monetary policy. The regulator also warned that it may tighten policy further if inflation expectations and secondary effects strengthen.
The next meeting of the Monetary Policy Committee is scheduled for September 9, 2026.
