The Monetary Policy Committee of the National Bank of Georgia decided at its meeting on January 29, 2025, to keep the monetary policy rate (refinancing rate) unchanged. The monetary policy rate remains at 8 percent.

According to the National Bank, inflation in Georgia has been below the target of 3% since the beginning of 2023. In December 2024, the general price level increased by 1.9% compared to the previous year. The domestic economic factors are largely responsible for maintaining inflation within the target range. Specifically, the consistent monetary policy of the National Bank has helped keep long-term inflation expectations stable. Prices for locally produced goods and services, which are more rigid and best reflect long-term inflation expectations, are rising at a low pace, with an annual change of 2.2% in December. Furthermore, economic activity in 2024 was strong, with an average economic growth rate of 9.4% from January to November. Significant contributions to economic growth came from improvements in the overall production capacity of the economy, which helped mitigate inflationary pressures from strong aggregate demand. External factors, such as lower fuel prices compared to the previous year, have reduced inflation. However, rising prices of food raw materials on international markets have been partially passed on to the local market, causing a slight increase in inflation compared to the previous month.

"Despite these trends, uncertainty has increased in the context of domestic and geopolitical turbulence, which affects sentiment. If the existing uncertainty is eliminated in the short term and the current situation on international markets persists, inflation is expected to be close to the target in the first half of 2025. Subsequently, partly due to base effects, inflation will temporarily exceed the target and stabilize around 3% in the medium term. Economic growth will return to its long-term trend of 5%. This possible development is reflected in the NBG's central scenario and is largely in line with current financial market expectations.

In order to optimally manage the potential risks arising from high uncertainty, the NBG will consider alternative scenarios along with the central one. The Monetary Policy Committee considered a high-inflation risk scenario, which would require a higher monetary policy rate trajectory than the central scenario. This risk scenario envisages prolonged uncertainty, which would exacerbate the geopolitical situation. The realization of these risks would increase inflationary pressure from external factors, while slowing economic growth relative to its long-term trend.

On the other hand, the committee considered a low-inflation risk scenario, which would require a lower monetary policy rate trajectory than the central scenario. This risk scenario envisages de-escalation of the geopolitical situation, which would reduce inflationary pressure from external factors and increase economic growth relative to its long-term trend, given the reduction in sovereign risk premiums.

Based on an analysis of the current economic situation and forecast scenarios, the Monetary Policy Committee opted for a cautious approach to further normalization of the rate and kept the monetary policy rate unchanged at 8%. With the gradual mitigation of risks, the policy rate will gradually normalize to a neutral 7% level. If, in the next meeting, macroeconomic data indicates more inflationary or disinflationary risks, the committee will shift toward the corresponding scenario.

In any case, the NBG will use all available instruments to maintain price stability, which means that the general price level growth will be close to 3% in the medium term.

The next meeting of the Monetary Policy Committee will be held on March 12, 2025," the statement reads.