National Bank of Belarus to lower refinancing rate by 0.5 pp to 11% March 1

MINSK. Feb 27 (Interfax) - The National Bank of Belarus (NBB) will lower its refinancing rate for the second time since the start of the year by 0.5 percentage points to 11% as of March 1.

"As of March 2023, the refinancing rate is decreasing from 11.5% to 11% annually, the overnight loan rate [is dropping] from 12.5% to 12% annually and the overnight deposit rate [is decreasing] from 10.5% to 10% annually," the NBB said in a press release, citing the slowdown of inflation.

"Inflationary processes, as expected, continue to slow. Annual inflation fell to 12% in January 2023 from 12.8% in December 2022 and trend inflation [slowed] to 9.2% from 10.2%, respectively," the NBB said.

The NBB expects annual inflation to slow to single-digits by the end of the first quarter. On the other hand, the NBB noted the modest inflow of retail funds at banks in January and the accelerated growth of the liquid component of the money supply, which could affect the dynamic of the inflation slowdown.

The NBB said it will make the next decision on the refinancing rate "taking into account the actual and anticipated dynamic of inflation, as well as assessing risks from internal and external conditions and financial markets' reaction to them."

The NBB's management board made the rate decision on February 23 after a meeting on monetary policy.

The NBB cut the refinancing rate on January 23 to 11.5% from 12%, where it had been since March 1, 2022, when the regulator hiked it from 9.25%. The NBB attributed the rate hike at the time to the growing risks of inflation accelerating "amid the share escalation of the geopolitical situation and a number of western countries' adoption of sanctions against the Russian Federation, the main economic partner of the Republic of Belarus."

The NBB's official forecast sees the refinancing rate averaging 10-11% in 2023.