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15 July 2021, 16:57

Belarus' central bank to raise refinancing rate to 9.25% per annum on 21 July

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

MINSK, 15 July (BelTA) – The refinancing rate will be raised to 9.25% per annum as from 21 July 2021. The interest rate on overnight loans will be set at 10.25%, with the interest rate on overnight deposits at 8.25%, the press service of the National Bank of the Republic of Belarus (NBRB) told BelTA.

The NBRB Board made the relevant decisions on 15 July after a session held to discuss monetary policy.

According to the NBRB, the growth of consumer prices, which began in 2020, continued accelerating in Q2 2021. Inflation processes grew more intensive primarily due to the external factors that favor higher inflation. The growth of international prices for goods, including energy resources, construction materials, and food, became faster due to rising consumer demand amid difficulties with manufacturing and logistics. Meanwhile, the economic activity in the world is recovering faster than the majority of international experts expected.

Heightened inflation expectations of economic agents represent another factor that contributes to the intensive growth of consumer prices in Belarus.

Meanwhile, the strengthening of the Belarusian ruble in Q2 2021 as well as the preservation of control over money supply kept inflation processes inside the country in check.

Taking into account the entire complex of external and internal factors as of June 2021 consumer prices grew by 9.9% year on year.

Belarus' central bank expects the inflation background in the world economy to remain higher than usual in the near future. At the same time inflation in the countries Belarus trades with will slow down gradually. The recovery of the balance of demand and supply on international markets will play a major role, including the food market due to the new harvest of agricultural crops. In particular, according to forecasts of the Bank of Russia the gradual normalization of the monetary policy, including the decisions that have already been made to raise the key interest rate, will allow reducing the intensity of inflation processes in the Russian Federation and slowing down the growth of consumer prices to the targeted level in H2 2022.

At the same time the lingering high inflation in the countries Belarus trades with coupled with considerable uncertainty about prospects of recovery of the world economy, about when the normalization of monetary policies in developed countries will begin and how fast it will proceed, and the growing deviation of the actual inflation in Belarus from the targeted level can prevent the slowdown of inflation processes in the country.

Taking into account all these factors and the need to curb pro-inflation risks, the Board of the National Bank of the Republic of Belarus has decided to raise the refinancing rate by 75 basis points.

In these conditions in Q3 2021 annual inflation is expected to be close to the figure registered in June 2021. The dynamics has a lot to do with the acceleration that has already happened. The intensity of inflation processes will start to slow down later on. In December 2021 the annual increase in consumer prices is expected to be close to 9%. Inflation will be close to 6% year on year by the end of 2022.

Consequent decisions of the Board of the National Bank on the monetary policy will still be based on the need to keep prices stable taking into account the entire complex of external and internal conditions that affect the actual and expected inflation and its deviation from the targeted number and taking into account estimated inflation risks, the central bank's press service concluded.

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