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11 June 2021, 12:30

Belarus' central bank in favor of cautious monetary policy

The National Bank of the Republic of Belarus. An archive photo
The National Bank of the Republic of Belarus. An archive photo

MINSK, 11 June (BelTA) – Belarus' monetary policy should be extremely cautious right now. Natalya Mironchik, Head of the Research and Strategic Development Office of the National Bank of the Republic of Belarus (NBRB), made the statement during the roundtable session held to discuss the policy of central banks in countries with an emerging market in the post-pandemic period, BelTA has learned.

The official said: “Inflation is accelerating in Belarus, this is why there are certainly difficulties. They happen because in the past we've lived through very brief periods of low inflation and unfortunately we remember lengthy periods of high and very high inflation. The dynamics of prices in Belarus is strongly connected to the dynamics of the ruble exchange rate. Respectively when the exchange rate fluctuates, it promptly translates into growing prices.”

Natalya Mironchik said that as a country with an emerging market Belarus cannot afford large-scale quantity relaxations the way developed countries can. “We don't have a sufficient level of trust in the monetary policy. Inflation expectations are unsteadily tied to inflation targets. There are high risks of the national currency's depreciation and inflation acceleration. This is why Belarus' monetary policy should be extremely cautious right now and should take into account the possibility of depreciation of the Belarusian ruble and the reduction of its purchasing power,” she explained.

“We cannot ignore it due to the openness of our economy and due to growing risks relating to the acceleration of the world inflation. While low inflation both in developed countries and in Russia helped us reduce inflation and stay on the 5% target, now the acceleration of inflation processes in the countries we trade with makes it difficult for us to implement the monetary policy. Naturally, the choice will be very difficult: either hit the 5% inflation target while curbing business activity, which may have a negative effect on economic growth, or maintain an acceptable economic growth rate but then inflation will deviate from the targeted figure. There are risks it may get out of control considering our historical experience. Everything may be rather complicated,” the official summed it up.

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