Belarus cuts rate another 25 bps to keep neutral stance

     The central bank of Belarus continued its 4-year easing cycle and lowered its key rate further to maintain a neutral monetary policy stance and keep inflation near its 5.0 percent target in 2020.
      The National Bank of the Republic of Belarus cut its benchmark refinancing rate by another 25 basis points to 8.75 percent, its first cut this year.
     Since April 2016, when it embarked on the current easing cycle, the rate has now been cut by 16.25 percentage points from 25.0 percent.
     Future policy decisions will continue to rest on achieving the inflation target, the bank added.
     The central bank said its vision of inflation in 2020 had not changed since November and it still expects inflation to fall within its 5.0 percent target, taking into account the planned rise in regulated prices and tariffs, low inflation in Russia and Europe, and a largely neutral impact on prices from domestic economic activity.
      The decision to lower the rate takes into account any risks and uncertainties that could create inflationary pressures, the central bank said, pointing to the volatility of international financial markets and events in China, a reference to the current outbreak of the coronavirus that is adding uncertainty to the global economic outlook.
      Headline inflation in Belarus was steady at 4.7 percent in January and December, slightly lower than the central bank had expected, but close to its target.
     The Belarus ruble is also expected to be near equilibrium, the central bank said.
     The government and central bank in January adopted a major strategy to improve trust in the Belarusian ruble by pursuing a coordinated policy to reduce the reliance of foreign currency in the country and ensure the Belarusian ruble occupies a leading role in the domestic economy.
     Government debt commitments are around 97 percent denominated in foreign currency.
     Among the features of this strategy is for the central bank to fully transition to inflation targeting by 2021, a reduced footprint by the central bank in the foreign exchange market, reduced monopolies in the economy over the next few years, a reduction in state debt, regular issues of government debt in Belarusian rubles starting this year with various periods of maturity, the creation of alternative forms of savings to procure long-term sources of funding in the ruble, and ensure that all taxes, rents, tariffs and prices by state-run organizations are set in Belarusian rubles.
     After rising from February 2019 to July 2019, the Belarusian ruble has eased since November and fell further to 2.19 to the U.S. dollar today, down 4.1 percent this year.

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