The central bank informed yesterday that it decided to increase its interest rate from monetary politics in 50 basic points, going from 5.00 to 5.50% per year. Consequently, the Association of Multiple Banks of the Dominican Republic (ABA) explained today that this rise “definitely has a transmission channel to bank rates, not only in the Dominican Republic but globally.”
As explained by the ABA to Free Journalthe rate of new loans It will be the one that suffers the increases.
He explained that more than 50% of the portfolio of loansincluding SMEs, was restructured in 2020 at fixed rates of around 8% and for a term of three years, which will be in force until July 2023. He recalled that this was possible with the monetary stimuli of 2020 for some 215,000 million pesos, in around 5% of the Gross Domestic Product (GDP), from liquidity facilities arranged by the central bank.
“In the case of non-restructured financing and new credits, due to a higher cost of funding via the interest rate passive, it is to be expected that the active rates will rise, that is to say of the loans”, specified the ABA.
He added that the foregoing is “in line with the signs of the monetary politics aimed at controlling inflation and for the economy to grow according to its potential so that we can preserve the certainty to successfully overcome this difficult international situation”.
“It is important to note that this increase in the rate of monetary politics that has been operating also has a transmission channel in passive interest rates, that is, the one that is paid to savers and depositors”, highlighted the union.
The rise in the rate monetary politics the central bank bases it on a “comprehensive evaluation of the behavior of the world economy, the greater persistence of inflationary pressures and the increase in international uncertainty derived from recent geopolitical conflicts.”
Likewise, the bank highlighted that “price dynamics continue to be affected by external shocks that are more permanent than expected, associated with the notable increase in oil prices and other important raw materials for local production, as well as the high costs of international container shipping and other disruptions in supply chains”.
With this decision taken at your meeting of monetary politics of March, the central bank has increased its rate of monetary politics by 250 basis points from November 2021, in line with the cycle of increases in interest rates at the international level.
The union indicated that the position that the monetary politics corresponds to the persistence of inflationary pressures with a high imported component, given the complex and uncertain outlook caused by the effects of the pandemic and geopolitical phenomena.
In the middle of last March, the Federal Reserve (Fed, central bank) of the United States raised its reference interest rates by a quarter of a percentage point to take them to 0.25-0.50%, in the face of inflation at its highest level in 40 years and that could continue to rise, according to its forecasts.
