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Belarus Monetary Policy January 2023

Belarus: Central Bank cuts rates in January

On 18 January, the National Bank of the Republic of Belarus (NBRB) announced that it would reduce the refinancing rate to 11.50% from 12.00% on 23 January. The decision marked the first change in policy since last February, when war broke out in Ukraine and the Bank hiked rates in a bid to stabilize a tumbling ruble.

The Banks decision to cut rates was driven by inflations steady deceleration from August until December, which had accelerated markedly following the introduction of price controls in October. Additionally, the Bank stated that softer price pressures in late 2022 drove down inflation expectations for 2023, which in turn helped to keep rubles flowing into the banking system. Against this backdrop, the Bank sees inflation declining further ahead.

The NBRBs forward guidance was somewhat dovish. The Bank highlighted that it will focus on maintaining the real interest rate in positive territory in order to protect the ruble. That said, it announced that it will cut rates further “as inflation slows down, in the absence of new shocks”.

Analysts at the EIU commented on the monetary policy outlook:

“We expect the NBRB to continue to reduce interest rates in 2023, with rates ending the year at 10%, as inflation eases. High levels of dollarisation of deposits and loans may inhibit the effectiveness of indirect monetary tools.”

Analysts at the EIU commented on the monetary policy outlook:

“We expect the NBRB to continue to reduce interest rates in 2023, with rates ending the year at 10%, as inflation eases. High levels of dollarisation of deposits and loans may inhibit the effectiveness of indirect monetary tools.”

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