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Belarus Monetary Policy June 2018

Belarus: Central Bank cuts key rate to 10-year low in June

On 20 June, the Board of the National Bank of the Republic of Belarus (NBRB) decided to cut the refinance rate starting 27 June by 50 basis points, from 10.5% to 10.0%. The Bank’s move marked a return to monetary easing, following a decision to hold rates in mid-March, and brought the key rate to the lowest level in a decade.

Easing inflationary pressures were behind the NBRB’s decision; headline inflation reached an all-time low of 4.4% in May, against the backdrop of tight monetary policy and sustained fiscal discipline. Meanwhile, the Belarusian ruble has held up against most major currencies. In its accompanying statement, the Bank commented that it does not expect foreign exchange rate developments to have any meaningful impact on the inflationary environment in the country in the short term. Nevertheless, inflation is expected to pick up pace slightly in the second half of the year amid stronger domestic demand and increasing regulatory prices.

Looking ahead, the Bank refrained from giving any indications of future monetary policy changes. However, amid the modest acceleration of inflation toward the Bank’s 6.0% cap expected in the second half of the year, rates appear unlikely to move much over the coming months. In the medium- to long-term, the NBRB expects only a modest impact from rising domestic demand on the inflation rate, with the ongoing reduction in inflation expectations pointing to inflation edging closer to the 5.0% target.

The next monetary policy meeting is scheduled for 19 September.

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