The Central Bank of the Dominican Republic (BCRD) informs that the consumer price index (CPI) for the month of June registered a variation of 0.64% with respect to the month of May 2022, placing the accumulated inflation in the first semester of the year 2022 at 4.96%, and placing the interannual inflation measured from June 2021 to June 2022 at 9.48%.
The monthly report of the BCRD indicates that the underlying inflation for the month of June 2022 registered a monthly variation of 0.54%, reaching the annualized growth of 7.11%, which shows a decrease with respect to the rate of 7.29% of the month of May 2022. It should be noted that underlying inflation isolates the behavior of certain foods with great variability in their prices, as well as fuels, services with regulated prices such as the electricity rate, transport and alcoholic beverages and tobacco, with the objective to extract clearer signals for the conduct of monetary policy.
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The report published by the governing body explains that the behavior of inflation in the domestic sphere, as in the rest of the world’s economies, continues to be affected by external factors that have been more persistent than expected due to the duration of the conflict. Russia-Ukraine, which has generated additional upward pressure on the prices of oil and other imported raw materials that are used as an input for local production. In the same way, the costs of international container transport remain high after the substantial increase registered in the period of lto the COVID-19 pandemic, as well as the persistence of other disruptions in supply chains as a result of limitations in aggregate supply.
It adds that in addition to these external components, in recent months internal pressures have begun to be verified to the extent that aggregate demand has recovered remarkably in relation to pre-pandemic levels and the rates of various services of the economy.
The BCRD reiterates that given the current situation, it maintains a follow-up of the inflation trajectory, implementing measures in a timely and prudent manner, to contribute to the convergence of general inflation to the target range of 4.0% ± 1.0% in the policy horizon. In this sense, as of July 2022, the monetary policy interest rate was increased by 75 basis points, from 6.50% per year to 7.25% per year, for an accumulated increase of 425 basis points from November 2021 to date, to promote a reduction in inflationary pressures. Likewise, this process of monetary normalization has been combined with open market operations to withdraw excess liquidity and with the return of resources granted to financial intermediaries during the pandemic period.
It is noteworthy that the orientation towards a normalization posture of monetary policy has been adopted by other advanced economies such as United States, England, Canada and soon as it was announced the euro zone). Similarly, most of the Central banks of Latin America have made significant increases in their reference rates in order to contain the pressures on prices and contribute to the convergence of inflation towards the objectives established in the respective monetary policy schemes of each country.
Variation of the CPI by groups
The BCRD report establishes that when analyzing the results of the CPI for the month of June 2022, it is observed that the groups with the greatest contribution to the growth of monthly inflation were Food and Non-Alcoholic Beverages (1.18%), Restaurants and Hotels (1.00 %), Transportation (0.44%), Miscellaneous Goods and Services (0.63%) and Furniture and Household Items (0.88%), together explaining 89% of the general inflation for the month of June 2022. A relevant aspect to to point out is that the set of measures implemented by the Government, particularly the fuel subsidy in the local market, has contributed to the fact that the behavior of inflation was not higher in the period of validity of said subsidies.
The growth of 1.18% in the price index of the Food and Non-Alcoholic Beverages group It is mainly explained by the price increases observed in fresh chicken (3.99%), cassava (10.23%), green bananas (5.65%), avocados (6.11%), soybean oil (1.45%), rice (0.51 %), ripe bananas (5.22%), purified water (0.79%), milk (1.22%), onions (2.10%), lettuce (9.30%) and beef (0.75%), while other food goods registered decreases in their prices such as peppers (-9.03%), sour lemons (-25.92%), tomatoes (-8.62%) and garlic (-2.84%).
While the variation of 1.00% of the index of the Restaurants and Hotels group, second row in contribution to the general CPI for the month of June 2022, responds mostly to increases in the prices of food services prepared outside the home such as dish of the day (1.08%), chicken service (1.72%), food service with accompaniment (1.01%) and juice served outside the home (1.41%). It is important to reiterate that the increase in the price index observed in this group is the result of increases in the prices of basic inputs for its production, including meat, oil, rice, bananas, cassava, bananas, beans, bread, sausages, fish, pasta, condiments, cheese, among others, which directly affect the consumer price of these food services.
With respect to the IPC of the Transportation group, this registered an increase of 0.44% in the month of June, mainly due to increases in the price of air tickets (14.66%), the increase in ground transportation services by taxi (2.66% ), by urban bus (0.78%) and the vehicle repair service (0.54%). The moderate inflation of the Transport group is the result of the measures implemented by the Executive Power in the subsidy to domestic fuels, to avoid new rises due to the increase in the international price of oil, managing to reduce its incidence in the variation of the general CPI.
Regarding the price index of the group Miscellaneous Goods and Services, it grew 0.63% in June 2022, mainly due to price increases in personal care services (0.67%) and personal care items (0.79%). The variation of 0.88% in the CPI of the Furniture and Household Items group responds largely to the increases in goods and services for home maintenance (1.79%).
Inflation of tradable and non-tradable goods
The BCRD report indicates that the CPI for tradable goods, those that can be exported and imported free of restrictions, varied 0.61%, while the price index for goods and services Non-tradable goods, which by their nature can only be marketed within the economy that produces them or are subject to measures that limit their imports, grew 0.67% in June 2022.
Inflation by geographic area
Regarding the behavior of the CPI by geographic region, the issuing entity indicates that the results of the consumer price index of the Ozama region, which includes the National District and the Santo Domingo province, varied 0.52%, the North region 0.77%, the region This 0.63% and the South region 0.75%. The lower variation registered in the CPI of the Ozama region is mainly explained by the combination of the lower incidence of the CPI of the Food and Non-Alcoholic Beverages and Restaurants and Hotels groups in this geographic area.
Inflation by quintiles
The BCRD report states that the analysis of the price indices by socioeconomic strata shows that the quintiles with the lowest incomes registered variations of 0.68% in quintile 1, 0.69% in quintile 2 and 0.71% in quintile 3, with increases in this behavior affecting prices of the Food and Non-Alcoholic Beverages group. While the quintiles with the highest income (4 and 5), registered inflation rates of 0.62% and 0.52% respectively, due to the growth in the prices of air tickets and some food goods.
