Monetary conditions remained moderately loose in Q2-2024, and the National Bank was late in responding to inflation risks.
Real interest rates on loans and deposits remained almost unchanged compared to Q1-2024. Interest rates fell slightly short of neutral levels, which helped meet the economy’s high demand for credit and supported excess demand. The Belarusian ruble remained moderately undervalued, corresponding to small pro-inflationary effects. Only in July did the National Bank respond extremely restrainedly and not very consistently to the growing inflation threat by using only auxiliary tools. The measures taken will push interest rates higher and allow them to reach neutral levels by the end of the year. This will weaken lending and demand, but neutrality will not be enough to return the overheated economy to balance quickly.