Building inflation-targeting credibility after 2009

Rather than return to its pre-war exchange-rate management after the shocks of 2008, the National Bank of Georgia moved toward a full inflation-targeting framework starting in 2009, a deliberate bet that a transparent, forward-looking rule would rebuild confidence in the lari faster than discretionary intervention could. The bank's own account of the transition describes it as gradual and sequenced: early steps focused on strengthening liquidity-management tools so that policy-rate changes would actually move market interest rates, since the monetary-transmission mechanism in a small, partly dollarized economy had previously been weak. In 2013, the National Bank of Georgia introduced a formal Forecasting and Policy Analysis System to base rate decisions on structured macroeconomic modelling rather than judgment alone, and from 2016 it began publishing its own projected policy-rate path, a step toward the forward-guidance transparency practiced by more established inflation-targeting central banks. The cumulative effect over roughly a decade was to turn a central bank that had been forced into emergency, crisis-driven intervention in 2008 into one with a published medium-term inflation target and a reasonably credible track record of returning inflation to that target after shocks, even as the lari itself continued to move more freely than it had under the earlier managed regime.