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Belarus Monetary Policy May 2019

Belarus: Central Bank stays put in May

At its 3 May meeting, the National Bank of the Republic of Belarus (NBRB) left the refinancing rate unchanged at an over decade-low 10.0%, in line with analysts’ expectations.

The decision to refrain from another cut was reflective of higher inflation at the outset of the year, caused by higher fuel prices and a poor agricultural harvest at the end of last year. Moreover, robust wage growth in the back-end of 2018 further stoked prices pressures, as demand was pushed ahead of supply in Q1. Meanwhile, the Belarusian ruble held its ground in Q1 amid a favorable external environment, as higher inflation in Russia, the country’s main trading partner, offset the rise in domestic price pressures.

Regarding its forward-looking guidance, the NBRB expects the current rate to bring inflation near the 5.0% target by the end of the year. Domestic inflation should begin to ease amid more moderate household spending and increased productivity in the months ahead. Meanwhile, the external environment will likely support the outlook, as the recent dovish turn in major central banks lowered capital outflow risks. Nevertheless, downside risks stemming from a downturn in the exchanged rate, owing to a drop in oil prices, persist.

The next monetary policy meeting is scheduled for 7 August.

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