Republic of Belarus: Technical Assistance Report-Monetary Policy Modeling and Forecasting

COVID-19 pandemic implications: The report was put together at the brink of the pandemic, which is developing rapidly and amidst substantial uncertainty about prospects for global recovery. Therefore, the TA recommendations and further steps outlined in the report should be reviewed and reassessed once the current situation normalizes. The NBRB has made substantial progress in improving its forecasting and policy analysis system (FPAS) and its integration into monetary policy decision-making. In line with the past advice, a well-functioning FPAS and model-based forecasts and policy analysis are now effectively integrated into the policy making process. The quarterly model-based forecasting and policy decision rounds have become a routine and provide key inputs into the NBRB’s decision making process. On top of that, the NBRB has improved internal and external communication, interbank money market operations and other parts of monetary policy. As the next step, the NBRB should better anchor inflation expectations via introducing a continuous medium-term inflation target with a symmetric band around it, which should replace the annual setting of an end of the year ceiling for inflation.