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Belarus Monetary Policy February 2020

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

At its 12 February meeting, the National Bank of the Republic of Belarus (NBRB) trimmed the refinancing rate by 25 basis points to an all-time low of 8.75%. The rate on overnight credit was also cut from 10.00% to 9.75%, as was the rate on the overnight deposit, from 8.00% to 7.75%.

The rate cut came against the backdrop of softening price pressures and lackluster economic activity growth. Inflation decelerated faster than the Bank had expected at the end of 2019, dipping to a 17-month low of 4.7% in December (November: 5.0%), amid easing food and services inflation. As a result, inflation landed below the Central Bank’s 5.0% target for the first time in over a year where it also stayed at the outset of 2020 (January: 4.7%). This came against the backdrop of weakening growth momentum last year: Annual growth slumped to a three-year low of 1.2% in 2019 (2018: +3.1% year-on-year) amid a broad-based downturn in activity.

Looking ahead, the NBRB reaffirmed its projection that inflation will stay around the 5.0% target throughout this year. A stable Belarusian ruble and downbeat domestic demand should keep price pressures in check, as slowing private credit and moderate wage gains are expected to constrain consumer spending growth. Externally, the NBRB sees slowing inflation in Russia and the EU, and low global oil prices as key factors supporting national inflation to hit the target level.

The next monetary policy meeting is scheduled for 13 May 2020.

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