Business news

14 Apr 2021

Belarus’ refinancing rate to go up to 8.5% on 21 April

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MINSK, 14 April (BelTA) – On 21 April 2021 Belarus’ refinancing rate will be increased to 8.5%, the overnight lending rate to 9.5%, and the overnight deposit rate to 7.5% per annum, BelTA learned from the Information and PR Department of the National Bank of the Republic of Belarus.

The Board of the National Bank made these decisions following the latest session to discuss monetary management policy on 14 April taking into account the whole range of external and internal factors affecting the current and future dynamics of consumer prices.

“In late 2020, inflation processes accelerated, which was caused by the transfer to prices of the occurred weakening of the Belarusian ruble, as well as supply shocks in the markets of certain food products. At the start of 2021, inflation continued to accelerate under the influence of further increases in world prices for food products, as well as for imported non-food goods, the cost of which increased for the consumer due to increased logistics costs and supply disruptions due to the pandemic. Additional pro-inflationary impact on the domestic market of Belarus was formed in connection with the abolition of value added tax benefits,” the central bank said.

The abovementioned factors against the background of accelerating inflation and its prolonged deviation from the 5% level led to an increase in inflation expectations, which is confirmed by the results of the population survey and enterprise monitoring. As a result, the list of goods and services in the consumer goods basket, the prices for which began to grow at a higher rate, was extended. As of March 2021, the increase in consumer prices made 8.5% in annual terms.

In order to limit inflation, the National Bank adopted a set of measures within the framework of the monetary targeting regime, aimed at tightening control over the money supply.

The National Bank said that higher inflationary background is expected in the global economy in the near future due to the number of developed countries pursuing stimulative monetary policies. Inflation in the countries, which are major trading partners of Belarus, is also expected to be high. Thus, according to the Bank of Russia, consumer price growth in the Russian Federation will slow down to the target levels no earlier than the first half of 2022.

At the same time, the impact of food price shocks, and also the consequences of the pandemic in terms of higher costs of imported non-food products may be more significant on inflation in Belarus.

“Taken together, these factors form prerequisites for the preservation of elevated inflation expectations of economic agents for a long time, which increases the risks of preserving elevated inflation in the future. At the same time, weak consumer and investment demand within the country will somewhat limit inflation. Under these circumstances, in order to limit the pro-inflationary risks and strengthen measures to control the money supply, the Board of the National Bank decided to increase the refinancing rate by 75 basis points,” said the central bank.

Taking into account the influence of all factors, experts forecast a decrease in the quarterly growth rate of consumer prices starting from Q2. At the same time, the earlier acceleration will be reflected in the annual inflation rate until the end of the current year. It is expected that the annual rate of price growth will increase in Q2 2021 compared to the current value and then decrease by the end of the year. In December 2021, consumer price growth is estimated to be about 7%.

Thereafter, annual inflation will continue to slow and from Q2 2022 is estimated at the level of the medium-term target of about 5%.

“When considering monetary policy issues, the Board of the National Bank will continue to proceed from the need to maintain price stability. The decisions will be based on a comprehensive analysis of external and internal factors, taking into account the duration of their impact and possible secondary effects, as well as an assessment of inflationary risks,” the department said.



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