Belarus: Central Bank continues policy easing in June
On 28 June, the National Bank of the Republic of Belarus (NBRB) cut the refinancing rate by a further 25 basis points to 9.50%. The NBRB also lowered the interest rates on overnight loans and overnight deposits by 25 basis points each, to 10.50% and 8.50%, respectively. June’s decision followed May’s cumulative 75 basis point cut, bringing the year-to-date total to 250 basis points of interest rate easing.
The Bank reported that price pressures softened further, likely motivating its move: Inflation fell to 3.5% in May, declining 0.3% month on month. Additionally, core inflation was negative for the ninth consecutive month in May, hinting at subdued domestic activity and likely prompting the Bank to loosen the reins on the economy. The introduction of price controls in October 2022 and a high base effect from the outset of the Russia-Ukraine war supported the disinflationary trend, albeit somewhat artificially.
The NBRB’s forward guidance remained elusive, with the Bank reaffirming that upcoming decisions would be based on inflation and inflation expectations, internal and external risks to the outlook, and the response of financial markets to said risks. Nevertheless, the high degree of dollarization of bank deposits and loans may dampen the effect of monetary policy on the economy. Low appetite for the ruble and surging political risk pose further risks to the Central Bank’s efforts.
Our panel anticipates additional monetary policy easing later this year as the Bank balances inflationary risks and an ailing domestic economy.