Central Bank Watch - How long can the NBG wait?

We expect the NBG to keep the monetary policy rate at 8.0% at its monetary policy meeting on Wednesday, 6 May 2026. We also expect the rate to stay at this level through end-2026, before declining gradually to 7.50% by end-2027, assuming the recent price shock fades.

Inflation shock postpones easing
The upward revision of our 2026 average inflation forecast from initial 3.0% to 4.8% is the key change in our outlook. It is driven by supply-side factors. The Iran escalation has pushed global energy prices higher, reflected in fuel prices in Georgia, while the April electricity tariff hike added a one-off increase to regulated prices. Together, these factors are sufficient to keep headline inflation above the 3.0% target through 2026.
The inflation mix remains heavily driven by food. After a period of stability, food inflation re-accelerated, reaching double-digit levels through late 2025 and early 2026, before slowing to 7.9% y/y in Mar-26. Despite this moderation, it remains the largest contributor to headline inflation. Underlying inflation remains contained, but some pressure is emerging. Core and non-food inflation are still below the 3.0% target, while services inflation has only recently moved above it, reaching 3.3% y/y in Mar-26 after staying below target in 2025. Inflation is therefore not yet broad-based, but the pickup in services and energy-related risks limit the scope for near-term monetary easing.

The policy cycle: from easing to extended pause
To understand where the NBG stands today, it helps to look at how quickly the easing narrative has ended. Between May 2023 and May 2024, the NBG cut rates by 300bp, from 11.0% to 8.0%, as inflation moved toward target and the GEL stabilized. The market expected further cuts in late 2024 and 2025. Instead, the NBG paused - and has held at 8.0% for a full two years.