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External factors expected to have little effect on inflation in Belarus in medium term

Economy 06.11.2019 | 17:52

MINSK, 6 November (BelTA) – The National Bank of the Republic of Belarus does not expect external factors to put pressure on inflation in the medium term, BelTA learned from Chairman of the Board of the National Bank of the Republic of Belarus (NBRB) Pavel Kallaur on 6 November.

Pavel Kallaur said: “We expect the external environment to be favorable for price dynamics in Belarus. The external conditions have become less inflationary.”

Since the growth of consumer prices is steadily slowing down and risks are decreasing, including risks relating to sanctions, the Bank of Russia has revised its inflation projections. The move has predetermined faster reduction of the key lending rate in the Russian Federation.

Since the intensity of inflation processes in the eurozone and the USA is declining and there are risks of a substantial slowdown of the world economy growth, the U.S. Federal Reserve System and the European Central Bank continue softening their policies. “On the whole, the decisions made by the key monetary regulators lately favor a weaker inflation background and a lower pressure on domestic prices in Belarus in the medium term,” Pavel Kallaur said.

No pro-inflation pressure is expected from domestic factors either. It will be facilitated by the projected persistence of economic activity near its equilibrium level in the medium term. Economic growth will be characterized by balanced dynamics of domestic demand and foreign trade.

The budget policy will not be conducive to faster inflationary processes despite the budget deficit expected in 2020. Budget surplus from previous years will be used primarily to pay off the external state debt.

While making monetary management decisions, Belarus' central bank will continue taking into account the entire complex of domestic and foreign conditions, primarily actual and expected inflation dynamics in comparison with the targeted number and the degree of implementation of inflation risks.

BelTA reported earlier that on 6 November the Board of the National Bank of the Republic of Belarus decided to reduce the refinancing rate from 9.5% to 9% per annum as from 20 November, reduce the overnight credit rate from 10.75% to 10% per annum, and reduce the overnight deposit rate from 8.25% to 8% per annum.

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