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Belarus Monetary Policy February 2019

Belarus: Central Bank keeps rate unchanged in January amid high inflation

At its 6 February meeting, the Board of the National Bank of the Republic of Belarus (NBRB) kept the refinancing rate unchanged at an over decade-low 10.0%, in line with analysts’ expectations. The decision to refrain from another cut was reflective of higher inflation at the outset of the year.

In its communiqué, the NBRB remarked that high domestic demand and a poor agricultural harvest had pushed up inflation at the end of last year. Moreover, the VAT hike in Russia increased costs for raw-materials and thus added further pressure on prices. The board consequently left the rate unchanged with the aim of pushing inflation towards the 5.0% target for this year and also so as to avoid throttling business activity.

Regarding its forward-looking guidance, the NBRB maintained a dovish tone, deeming recent price pressures as “temporary”. Domestic inflation is expected to ease in the first two quarters, as last year’s wage increase translates into upbeat labor productivity. Nevertheless, geopolitical factors—including additional sanctions on Russia—remain the key downside risk to the board’s outlook, as they would likely raise prices on imports.

The next monetary policy meeting is scheduled for 3 May.

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