The central bank of the Dominican Republic (BCRD) reported this Friday that in its last meeting it decided to increase its interest rate from monetary politics in 25 basis pointsso it will go from 8.00% to 8.25 percent.
In this way, the rate of the permanent liquidity expansion facility (1 day repo) goes from 8.50% to 8.75% per year and the interest-bearing deposit rate (overnight), from 7.50% to 7.75% per year.
In December of last year the monetary policy rate was increased to 4.50% and since then the central bank Every month, except for February, which kept it at 5.0%, and April, which left it at 5.50%, it has increased, for an accumulated figure of 3.75% in nine months.
“This decision is based on an exhaustive evaluation of the recent behavior of the economy, especially of inflationary pressures”, explains the financial institution in a press release.
He adds: “In relation to external factors, there has recently been a moderation in the prices of raw materials, particularly oil and food; as well as in container transport costs, which have gone from a maximum of about US$20,000 per container from ports on the Asian continent in 2021 to a world average of approximately US$4,000 per container today. On the other hand, inflation continues to be influenced by the second-round effects of these external components and by internal demand pressures, to the extent that the momentum of economic activity is maintained”.
The central bank explains that the monthly variation of the consumer price index (CPI) was 0.21 percent during August 2022, the lowest in the last 27 months.
Meanwhile, year-on-year inflation continues its gradual convergence to the target range of 4% ± 1%, decelerating from a maximum of 9.64% in April to 8.80% in August. “Likewise, year-on-year core inflation, which excludes the most volatile components of the basket, is beginning to show signs of moderation, going from 7.29% in May to 7.12% in August.”
The central bank explains that the increases made in the monetary policy ratetogether with the reduction in inflation expectations, “have caused the real interbank interest rate to be approximately one percentage point above its estimated neutral level.”
“Likewise, there is evidence of a significant slowdown in monetary aggregates and a significant increase in the passive interest rate. On the other hand, the increase in the active interest rate has been more gradual, remaining below pre-pandemic levels,” the document adds.
According to him central bank Inflation is expected to continue decelerating in the coming months, converging to the target range by mid-2023. “In this context, the BCRD will be permanently monitoring external financial conditions and the expectations of economic agents, in order to take appropriate measures. necessary to maintain price stability.
“It is important to note that this decision to increase the MPR by 25 basis points considers that the BCRD preventively initiated the monetary restriction process at the end of 2021. This timely reaction has contributed to the moderation of inflation and has granted the room for more gradual adjustments in the policy rate, unlike what is observed in most advanced and emerging economies”, says the central bank.
