Santo Domingo – The Central Bank of the Dominican Republic (BCRD) reports that the consumer’s price index (CPI) for the month of February registered a variation of 0.92% with respect to the month of January 2022. With this result, the accumulated inflation for the period January-February stood at 2.11%.
The monthly report of BCRD indicates that year-on-year inflation measured from February 2021 to February 2022 stood at 8.98%, while annualized core inflation stood at 6.97% in February 2022.
This last indicator isolates the behavior of some foods with great variability in their prices, as well as fuels, services with regulated prices such as electricity rates and transport, in addition to alcoholic beverages and tobacco, thus allowing clearer signals to be extracted. for the conduct of monetary policy.
The report released by the BCRD explains that the dynamics of internal prices continue to be affected by external shocks, mainly associated with new increases in oil prices as a result of international uncertainty derived from the escalation of geopolitical conflicts that have limited production. and world oil supply.
In particular, the price of texas intermediate oil (WTI) was quoted above US$95 per barrel at the end of February, increasing from the average of US$83 registered in January 2022, and currently shows high volatility, trading around US$110 dollars per barrel. .
It should be noted that the rise in the prices of fuels and land transport services explained 42% of the inflation registered in the month of February 2022.
Central Bank highlights increase in international prices of food goods
Similarly, it details that the international prices of important primary food goods for local production, such as corn, wheat and soybeans have continued to rise in recent months, conditioned by a more turbulent external scenario and tensions in the markets where the negotiations are agreed. transactions of this type of raw materials.
Likewise, the high cost of container transport and other disruptions in supply chains continue, which affects the prices of imported goods.
The report highlights that in this scenario, the Central Bank of the Dominican Republic has significantly reduced liquidity levels in the financial system through open market operations and the use of the Electronic Currency Trading Platform, which results in consistent with the cumulative increase of 200 basis points in the monetary policy rate within the framework of the plan to normalize monetary conditions.
The purpose of this measure is to mitigate the impact of imported inflation on domestic prices in a context in which real gross domestic product (GDP) has already exceeded its pre-pandemic level.
Measures moderate the rate of expansion of monetary aggregates
It adds that these measures have moderated the pace of expansion of monetary aggregates and the money supply (M1), after having experienced notable year-on-year growth in the first months of 2021.
Currently, at the end of February 2022, its annualized rate of increase has moderated to 14.0% and it is expected that it will continue to decline to around 9.0%-10.0%, in line with the nominal GDP expansion that would be consistent with the potential growth of the economy and with the inflation target of the BCRD.
The document also explains that the Dominican peso reflects an annualized appreciation of more than 5% at the end of February 2022, which, together with the monetary normalization process, is helping to mitigate inflationary pressures of external origin and would facilitate the gradual convergence of inflation to target range of 4% ± 1% in the monetary policy horizon.
Impact of the appreciation of the peso
In addition, the appreciation of the peso contributes to lower foreign debt service and reduces the cost of imports.
The monthly report on internal prices highlights that the set of measures recently announced by the president of the Dominican Republic, Luis Abinader, particularly the fuel subsidy to avoid new increases due to the increase in the price of oil in international markets and the subsidy up to 10% to inputs and raw materials for agriculture such as corn, wheat, soybeans, will contribute to the process of reducing inflation in the coming months.
Likewise, the increase in direct social aid through the Supérate program, the adjustment of the Bono Gas and the subsidized sales of food through the National Price Stabilization Institute (INESPRE) and the economic canteens, will contribute to improving the conditions of the most vulnerable population in this situation of imported inflation that we are going through.
Variation by groups
The analysis of the governing body of monetary policy indicates that, in relation to the detail of the CPI by groups of goods and services, the most significant variations were registered in the groups Transportation (1.97%), Miscellaneous Goods and Services (1.03%), Food and Non-Alcoholic Beverages (0.96%), Restaurants and Hotels (0.66%) and Housing (0.65%).
It details that the growth of 1.97% in the Transportation index was mainly due to the increases experienced in the prices of regular gasoline (3.30%) and Premium (3.56%); liquefied gas (LPG) for vehicles (2.40%) and diesel (4.33%). In addition, price increases were recorded in land transportation services by public car (1.02%); urban bus (1.60%), taxi (2.38%), motoconcho (0.74%); buses from private companies (5.68%), as well as automobiles (0.49%) and tickets abroad (2.97%).
The Central Bank also refers to the 1.03% increase in the price index of the Miscellaneous Goods and Services group in February; it is mainly explained by the price increases of health insurance (9.31%); of daycare services for children (4.82%); as well as in personal care services, such as haircuts for men (1.07%); finally, hair washing and styling (0.78%) and personal care items (0.62%).
Variation in food products and beverages
The variation of 0.96% in the CPI of the Food and Non-Alcoholic Beverages group responds fundamentally to the increases in the prices of chili peppers (8.27%); cassava (5.17%); green bananas (2.27%); soybean oil (1.96%); sour lemons (15.33%), fresh chicken (0.35%); avocados (6.87%); rice (0.43%); potatoes (3.83%); pork (1.49%); carrot (11.36%); evaporated milk (2.46%), fish (3.79%), purified water (0.82%), green bananas (2.09%), green pigeon peas (5.20%); passion fruit (11.61%), liquid milk (1.03%); while other food goods registered decreases in prices such as eggs (-2.43%), onions (-5.70%) and garlic (-3.80%).
The document explains that with regard to the variation of 0.66% in the CPI of the Restaurants and Hotels group, it is basically due to the increase in the prices of food services prepared outside the home. This includes the dish of the day (0.64%), the chicken service (0.70%) and the food services with sides (0.59%).
It is pointed out that the increase observed in the price index of this group is a consequence of the price increases of the basic inputs for its elaboration; among them meats, oils, rice, beans, some groceries, breads and sausages. In addition, cheeses, gas, among others, which directly affect the final price of these food services.
While the variation of 0.65% of the Housing group is explained practically in its entirety by the increase in liquefied petroleum gas for domestic use (LPG) by 2.40%; housing rental service (0.17%), housing maintenance services (1.07%) and door repair (4.12%).
Central Bank says inflation of tradable and non-tradable goods
The report establishes that when analyzing inflation according to the groups of tradable goods (those that can be exported and imported free of restrictions) and non-tradable goods (those that can only be traded within the economy that produces them or are subject to measures that limit their imports) it is observed that the CPI for Tradable goods registered an increase of 1.37% in the month of February, while that of Non-Tradable goods grew 0.46%.
Inflation by geographic area
The BCRD indicates that the results of the CPI in the different geographical regions showed that the variation of the CPI in the Ozama region, which includes the National District and the Santo Domingo province, was 0.81%, in the North region 1.03%, in the East region 0.98%. and South region 0.99%.
Inflation by quintiles
The Central Bank reported that the behavior of the CPI by socioeconomic strata shows that the quintiles with the lowest incomes registered variations of 0.82% in quintile 1, 0.90% in quintile 2 and 0.92% in quintile 3. The progress is mainly explained by price increases of food and fuel. Also, due to the increase in ground transportation services, personal care services and meals prepared outside the home.
As for the quintiles with the highest income (4 and 5), they registered inflation rates of 0.91% and 0.96%, respectively; This is largely due to the rise in fuel, automobile and airfare prices within the Transportation group.
