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Belarus Monetary Policy May 2020

Belarus: Central Bank cuts refinancing rate to fresh record low in May

At its 13 May meeting, the National Bank of the Republic of Belarus (NBRB) trimmed the refinancing rate by 75 basis points to an all-time low of 8.00%. The rate on overnight credit was also cut from 9.75% to 9.00%, as was the rate on overnight deposits, from 7.75% to 7.00%.

The decision to ease policy came against the backdrop of a fall in GDP in the first quarter and protracted economic weakness ahead owing to Covid-19 fallout. Although inflation rose to 5.4% in April (March: 4.9%) breaching the Central Bank’s 5.0% target and marking an eight-month high, policymakers deemed price pressures to be temporary and that falling aggregate demand will keep a lid on inflation, allowing for greater easing to support the economy through the crisis.

Looking ahead, the NBRB expects inflation to accelerate in the second quarter, before slowing in the second half of the year as the effect of depressed economic activity sets in. Nevertheless, it projects inflation to average between 5.0% and 6.0% this year; next year, the Bank sees inflation falling below the 5.0% target, as a feeble economic recovery weighs on price pressures.

The next monetary policy meeting is scheduled for 12 August.

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