The National Bank of the Republic of Belarus, which raised its rate by 500 basis points in 2015 to curb inflation that was boosted by the devaluation of the Belarus ruble, still expects inflation to be below its target of 12 percent in 2016, something the bank aims to achieve by controlling money supply.
Inflation in Belarus rose to 12.8 percent in February from 11.4 percent in January, primarily due to higher tariffs for housing and communal services, something the central bank said would not affect the recent trend in inflation.
The rate cut will take effect April 1.
The economy of Belarus, which borders Russia to the east, Ukraine to the south and Poland to the west, has been heavily affected by the economic crises in Russia, its main trading partner.
Last year the central bank had to intervene in foreign exchange markets and multiple exchange rates emerged after the central bank imposed capital controls. In January 2015 the central bank then set an exchange rate of 13,760 to the U.S. dollar, a depreciation of 31 percent since the start of 2014, and since then the ruble has continued to ease and hit 22,050 to the dollar on Feb. 11.
Since then, however, the ruble has firmed and was trading at 20,751 to the dollar today, still down 10 percent since the start of the year. The central bank has adopted an exchange rate policy known as a "managed float" with intervention only to avoid volatile changes.
The average rate on new ruble credit in February was 33.1 percent in nominal terms or about 20 percent in real terms, the bank said.