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There are positive trends in the monetary sphere in the first half of the year

The National Bank identified positive changes in the monetary sphere in 2017 H1. Results of the monetary policy implementation in the first half of the current year were considered at the enlarged meeting of the Board of the National Bank of the Republic of Belarus on July 27, 2017.

The adjustment of the focus of the National Bank’s and the Government’s policy on ensuring macroeconomic well-balancing contributed to the constraining of inflationary processes. In June, the annual growth rate of consumer prices dropped to 6.5% from 10.6% in December 2016. In June 2017, core inflation totaled 5.3% in annual terms.

A decline in actual inflation and confidence in the stability of this process made it possible for the National Bank to speed up the dynamics of the refinance rate reduction in 2017 H1, that led to a decrease in the interest rates in the credit and deposit market as well.

The dynamics of lending remains low on the background of excessive liquidity. In the corporate segment lending is constrained by low effective enterprises’ demand. On the whole, the disinflationary impact of domestic demand is still in place, despite an intensification of consumer crediting in 2017 Q2.

The trend towards reduction of deposits in foreign exchange, with the National Bank’s foreign exchange liabilities being declining, is continuing in the deposit market, reflecting the dedollarization processes.

In 2017 H1, the growth of gold and foreign exchange reserves was ensured, with the National Bank’s foreign exchange liabilities being declining.

The inflationary expectations in the economy are going down, while being still rather high. At the end of Q2 a more quick recovery of the households’ incomes and consumer demand growth is observed, which may constrain further slowing down of inflation together with the growth of prices for foodstuffs in June.

In 2017 H2, the National Bank continued to implement the monetary policy aimed at continuous constraining of inflation and maintaining macroeconomic well-balancing. In future, a possible reduction of interest rates will be determined by the development of the macroeconomic situation as a whole, the velocity of convergence of the prices growth rates with the medium-term target (no more than 5% in 2020), as well as the state of and prospects for the balance of payments of the Republic of Belarus.