The central bank of Belarus cut its benchmark interest rate for the third time, saying domestic inflation was slowing faster than expected while inflation in trading partners was also slowing down more rapidly, leading other central banks to actively lower their interest rates.
The National Bank of the Republic of Belarus (NBRB) cut its refinancing rate by another 25 basis points to 7.75 percent and has now cut it 125 points this year following cuts in February and May.
Since April 2016 NBRB has been easing its monetary policy and cut the rate 19 times by a total of 17.25 percentage points.
The rate cut was decided at an extraordinary meeting of NBB’s board today, ahead of the scheduled meeting on Aug. 12, with the rate cut taking effect on July 1.
In addition to cutting the refinancing rate, the overnight loan rate was also cut 25 basis points to 8.75 percent and the overnight deposit rate to 6.75 percent.
The board meeting comes after Belarus President Alexander Lukashenko on Friday asked the central bank to look into lowering the refinancing rate at a meeting to discuss economic support measures, according to local press reports.
According to BelTA, the state-owned national news agency, Lukashenko said all countries are lowering their interest rates to revive economic activity, inflation is within forecasts, and the central bank should carry out this rate cut before the end of June.
Belarus, formerly known as White Russia or Belorussia, became independent of the Soviet Union in 1991 and Lukashenko has been president since 1994.
Headline inflation in Belarus eased to 4.9 percent in May from 5.4 percent in April, just below NBRB’s target of 5.0 percent, while core inflation slowed to 3.9 percent from 4.5 percent in April.
Under these conditions, the central bank said continued easing its monetary policy, with moderately soft monetary conditions would allow it to maintain an acceptable level of price and financial stability.
After depreciating sharply in February and March, the Belarus ruble has risen since April though it remains well below its level at the start of the year.
In January Belarus’ government and the central bank adopted a major strategy to improve trust in the Belarusian ruble by pushing a coordinated policy to reduce reliance of foreign currency in the country and ensure the domestic currency had a leading role in transactions.
The government’s debt is around 97 percent denominated in foreign currency. A new Belarusian ruble was introduced in July 2016.
This strategy includes full transition to inflation targeting by 2021, a reduced footprint by NBRB in the foreign exchange market, reduced monopolies in the economy, lower state debt, regular issues of debt in Belarusian rubles, and ensuring that all taxes, rents, tariffs and prices by state-run organizations are set in Belarusian rubles.
The Belarusian ruble was trading at 2.37 to the U.S. dollar today, up 10.5 percent from a record low of 2.62 on March 24 and down 11.4 percent this year.
Belarus cuts rate 3rd time in ’20 after Lukashenko request
June 22, 2020
