Page 25 - BELRptJuly18

8.2 Central Bank policy rate
The National Bank of Belarus (NBB) is going to cut its key refinancing rate from 10.5% to 10% from June 27 , the regulator said in a statement published on June 21.
The central bank attributed the move to the fact that "projections concerning the situation in economy, foreign trade, the currency market, and the deposit market indicate that the emerging money and credit conditions will keep inflation within the targeted range".
The NBB's decision to cut its key refinance rate b y 0.5 pp to 10.5% on February 14, followed October's cut of the rate to 11% . In early November, the regulator's governor Pavel Kallaur said that the regulator predicts the key refinance rate will be cut to 10% in 2018. The central bank also estimates inflation will be about 6% in 2018.
In May, consumer prices increased by 4.4% y/y basis. The annual core inflation decelerated to 2.9% (3.1% in April 2018), due to the strengthening of the Belarusian ruble against the basket of foreign currencies.
The NBB believes that the inflation is expected to increase "to a certain degree given the weaker disinflationary influence of the domestic economy, as well as the possible growth in regulated prices".
"The formation of the Belarusian ruble exchange rate around the equilibrium level will not put pressure on prices," the statement reads. "Monetary conditions will remain close to neutral ones and continue ensuring the achievement of the price stability objective. It is assumed that the inflation will total 5.5% by the end of 2018."
The central bank added that the domestic demand impact on the dynamics of prices in the medium term is estimated as modest. A gradual reduction in inflation expectations, which is influenced by the current moderate dynamics of consumer prices and the monetary policy focus towards maintaining price stability, will be a contributory factor for curbing inflation in the medium term.
25 BELARUS Country Report July 2018 www.intellinews.com