Georgia’s National Bank raised its refinancing rate to 8.25% for the first time since 2022, tightening monetary policy in response to rising inflationary pressures linked to the Iran conflict.
The decision, announced on Wednesday, reflects a 0.25 percentage point increase following a prolonged period during which the rate had remained unchanged, according to the National Bank.
The regulator said that the escalating conflict in the Middle East, alongside continued shipping disruptions through the Strait of Hormuz, has triggered a new wave of supply-driven inflation globally. Rising international energy prices have already translated into higher fuel costs in Georgia, contributing to an increase in overall inflation.
‘We decided to increase the refinancing rate even by a small margin, which has a clearly pronounced preventive character’, said Georgian National Bank Governor Natia Turnava.
Annual inflation reached 5.9% in April, moving further away from the National Bank’s 3% target. Core inflation, which excludes food, energy, and tobacco, stood at 3.2%, while services inflation reached 3.7%, indicating growing underlying price pressures.
Despite these challenges, Georgia’s economy has remained resilient, with strong growth recorded in early 2026. Economic activity expanded by 10.7% in March and 9.1% in the first quarter, supported largely by high-productivity sectors that have helped offset some demand-driven inflationary pressures.
The National Bank noted that future inflation trends remain highly uncertain and will largely depend on how geopolitical developments unfold. While its central scenario assumes a gradual de-escalation of tensions in the coming months, risks remain tilted to the upside, particularly if supply disruptions persist or intensify.
The Monetary Policy Committee warned that prolonged geopolitical instability could further increase commodity prices and deepen supply chain disruptions, amplifying inflationary pressures in Georgia. Conversely, a faster resolution could ease global price pressure and support a quicker return to lower inflation.
Given these uncertainties, the National Bank said the rate hike was a necessary step to anchor inflation expectations and limit the risk of second-round effects. It added that further increases could be considered if inflation continues to rise or proves more persistent than expected.
The next meeting of the Monetary Policy Committee is scheduled for 17 June 2026.
According to Giorgi Kepuladze, chair of the board of directors of the local civil society organisation Society and Banks, inflation is at its highest level in the past two years, and the National Bank’s 3% target has been affected by the conflict in the Middle East. He added that the decision to raise the refinancing rate will increase borrowing costs.
‘The acceleration of inflation to 5.9% poses a direct threat to the purchasing power of the population, which requires an appropriate response from the central bank. If the pace of price increases does not slow down, it is not ruled out that the refinancing rate may be increased even further’, he told OC Media.
Helena Bedwell
