Friday, November 18, 2011

Belarus Central Bank Increases Rate 500bps to 40.00%

The National Bank of the Republic of Belarus raised its refinancing rate by 500 basis points to 40.00% from 35.00%.  The Bank said [translated]: "Another increase in the refinancing rate and interest rates on liquidity management operation is a sequential step to curb inflation and stabilize the economy and financial sector in general. Dunn's measure will also support renewed growth in recent months Urgent rubles deposits in banks and stabilize inflation expectations in the economy, and will become more factor to enhance the balance of payments surplus. National Bank and continues to conduct a balanced monetary policy, with the individual attention necessary to ensure price stability in the economy."

The latest move marks a continued string of aggressive rate increases, with the Bank previously raising the refinancing rate by 300bps to 30%, 500 basis points to 27% and 200 basis points to 22%.  The total amount of increases since the start of the year is now 2950 basis points.  Belarus reported consumer price inflation at hyperinflationary levels of 92.3% in October, up from 79.6% in September, and 36.2% in the year to June, according to the National Statistic Committee, meanwhile the government is forecasting 2011 inflation of as much as 39%.  

The Bank also said that interest rates on liquidity management operations would also increase, with the overnight deposit rate rising to 30% and the overnight credit rate rising to 60%.  
The USD-Belarussian ruble (BYR) exchange rate has doubled on the black market, rising to as much as 7,000 per dollar (approx. 6,000 in July), and currently trades around 8795 (5350 in September) against the US dollar, according to quotes from Yahoo Finance.


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