Setting is ready for discount rate reduction
On March 5th, the interbank market rates fell below 19% pa for the first time in 2013.
The government managed to convince the head of state to relax the monetary policy. The National Bank improved the banking system’s liquidity, which resulted in reduced interest rates in the interbank market. The February consumer price index permits the National Bank to reduce the discount rate gradually.
On March 1st, 2013 the Council of Ministers’ meeting set a task to converge interest rates on loans in local and foreign currencies. Due to high interest rates on loans in national currency (40% and higher) the state economic modernization programme has been jeopardized. Banking system will be forced to find internal and external reserves to provide for a low-cost supply of “long” money.
The National Bank has ensured the liquidity excess in the banking system in record-high volumes. As of March 7th, the volume of funds, placed by banks on National Bank’s overnight deposits was BYR 9.1 trillion. The funds were placed at 19% interest rate. The volumes of available funds in the banking system resulted in the interest rates at the interbank market falling below 19% pa – for the first time in 2013. In turn, banks continued reducing rates on individual deposits. This will result in lower interest rates on business loans.
To justify the discount rate reduction, the National Bank had to refer to reduced inflation. On March 7th, Belstat published data, quoting February CPI at 1.2%. In January-February, inflation was 4.3% and the pricing policy has been put under state control, which empowered the National Bank to announce the potential discount rate reduction. As a result, payments within loan agreements that refer to the discount rate will reduce.
Therefore, enterprises will receive access to loans at reasonable interest rates. Rapid decline in interest rates should not be anticipated, because the National Banks has grounds to be afraid of the sharp rise in lending in the local currency, which against the lack of success in the international trade and the potential growth of investment imports could deteriorate the currency market situation.
During searches of social and "green" activists and anarchists, law enforcement has seized computers, mobile phones and publications. The authorities have also exerted additional pressure on supporters of unauthorized street protests and independent lawyers, who represented defendants in the White Legion case. The security services have stepped up the persecution of opponents before the street protests announced by the opposition. Apparently, the Belarusian authorities aspire that participants in street protests would reduce in number and that the low interest of the population to socio-political agenda before the local election campaign would retain.