Monetary Environment Review

Monetary conditions were neutral in Q1-2025, but monetary policy became resistant to tightening

Interest rates on loans and deposits exceeded their neutral levels in Q1-2025. However, the extent of this excess was modest and, amid strong domestic demand, the contractionary impact of rates on lending activity was muted. As a result, money supply continued to grow at a pace outstripping GDP growth, indicating substantial excess demand in the economy and insufficient monetary policy tightness. The Belarusian ruble was estimated to be moderately undervalued by around 1.6% in Q1-2025.

In the second half of 2025, monetary conditions are expected to become moderately loose due to a shift in the National Bank's monetary policy approach. The central bank has shifted its focus toward credit support for the economy, while price stability has become a secondary objective. This pro-cyclical monetary policy and growing dependence of the National Bank on the executive branch weaken macroeconomic stabilization institutions and raise the risk of heightened volatility in the event of a sharp deterioration in external conditions.

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