Belarus cuts rate 50 bps as inflation slowdown intensifies

August 7, 2019

By CentralBankNews.info

Belarus’ central bank lowered its benchmark refinancing rate by 50 basis points to 9.50 percent to ensure interest rates remain neutral and inflation meets the target this year in light of a more intense slowdown of inflation in the second quarter of this year.
It is the first rate cut by the National Bank of the Republic of Belarus since June 2018 but extends the easing cycle that was begun in April 2016. Since then the bank’s repo rate has been lowered by a total of 15.50 percentage points.
In addition to the cut to the refinancing rate, the central bank’s board said the rate on overnight credit would be cut by 75 basis points to 10.75 percent while the rate on overnight deposits would be cut by 25 basis points to 8.25 percent.
All the central bank’s new and lower interest rates will take effect from Aug. 14.
Inflation in Belarus slowed to 5.7 percent in June from 6.2 percent in May and the central bank said its assessment of consumer price growth, which excludes seasonal changes, shows a decline in inflation to below its target of 5.0 percent.
In the previous three quarters, inflation was higher than this indicator, the bank added.
“Further decisions in the field of the National Bank’s key interest rates will depend on the correlation between the inflationary and deflationary factors,” the central bank said.

The National Bank of the Republic of Belarus released the following press release on Aug. 7:

“On August 14, 2019, the refinancing rate will be reduced from 10% to 9.5% per annum and the rate on overnight credit – from 11.5% to 10.75% per annum and that on overnight deposit – from 8.5% to 8.25% per annum.
The corresponding decisions were taken by the Board of the National Bank of the Republic of Belarus following the results of the meeting on monetary policy held on August 7, 2019.
In 2019 Q2, the intensity of inflationary processes slowed down. The assessment of consumer price growth, excluding seasonality for 2019 Q2, shows its decrease below the target level being 5% (during the previous three quarters, the growth was higher than this indicator).
The decisions taken in the field of interest rate policy ensure that it remains neutral in the context of the forecasted deceleration in inflation processes and the achievement of the inflation target for 2019.
The reduction in overnight credit and overnight deposit rates will narrow the interest rate collar on instruments designed to regulate banks’ liquidity and will increase the efficiency of the monetary policy transmission mechanism.
Further decisions in the field of the National Bank’s key interest rates will depend on the correlation between inflationary and deflationary factors.
The next meeting on monetary policy of the Board of the National Bank of the Republic of Belarus is planned for November 6, 2019.”
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