Belarus: Central Bank keeps key rate at an over 10-year low in September

At its 19 September meeting, the Board of the National Bank of the Republic of Belarus (NBRB) kept the refinance rate unchanged at an over one-decade low of 10.0%. The Bank’s decision to hold the rate followed a cut in mid-June as was predicted by our Consensus.

Inflation dynamics were in line with the Bank’s forecasts, prompting its decision to refrain from further policy easing. After remaining at an all-time low of 4.1% in July, intensifying price pressures drove inflation up to 5.0% in August—although still within the Bank’s 6.0% cap—chiefly on the back of higher administered prices, including tariffs for communication services and retail prices for fuel. Meanwhile, in the face of an ongoing emerging-market selloff, the Belarusian ruble has largely held up against most major currencies. The NBRB also reaffirmed its inflation year-end inflation target of 5.5% plus or minus 0.5 percentage points.

In its communiqué, the NBRB signaled it expects rising domestic demand to only have a modest impact on inflation. However, the external sector’s backdrop poses significant upside risks to the Bank’s inflation outlook. These include an expected pick-up in inflationary pressures in Russia, due to capital outflows and a weakening currency; uncertainty over the impact of escalating global trade conflicts; and significant fluctuations in financial markets.

Inflationary pressures are expected to intensify slightly by the end of the year, and a rate cut therefore seems unlikely in the coming meeting. In the medium- to long-term, the NBRB remains confident that headline inflation will stabilize around its 5.0% target.

The next monetary policy meeting is scheduled for 19 December.

FocusEconomics panelists see the key interest rate ending 2018 at 10.0%. In 2019, panelists see the Central Bank lowering the monetary policy rate further to 8.5% by the end of the year.