Inflationary pressures in the DR are mainly due to external factors and internal factors that have exacerbated pressures in other economies have been absent
Apart from the pressure that it may represent for the makers of monetary policy in Dominican Republica report just published by economists from the International Monetary Fund, in which central banks are presented with the probable need to keep interest rates higher for longer until there is evidence that inflation has been overcome, it is expected that not too late this year the conditions will have been generated. for a gradual loosening of monetary policy to begin.
The monetary authorities themselves seem to understand this, estimating in their report corresponding to January 2023 that the TPM is at an adequate level for inflation to converge to the target range of 4% ± 1% during 2023.
The inflationary pressures in the country have been originated mainly by external factors and internal factors have been absent that have exacerbated these pressures in other economies, such as the depreciation of the currency, contrary to what has happened in the country, that the Dominican peso has appreciated, and wage pressures generated after the pandemic, which has not been the case in the Dominican Republic.
It is now that the country has begun to discuss the possibility of readjusting minimum wages, within the framework of the National Wage Committee, where an agreement is expected to return the purchasing power lost to wage earners, without this becoming a disturbing factor in the price stabilization process.
The effort against inflation has been favored by the impact of the increases of 550 basis points set forth in the monetary policy rate since November 2021, facilitating a significant increase in the nominal interbank interest rate and a sustained decline in inflation expectations. inflation, causing the real interbank rate to be more than four percentage points above its estimated neutral level, which contributes to mitigating domestic demand pressures.
Faced with these conditions, we could see in a short time the same monetary authorities that have known how to be tough in conducting monetary policy when it has been necessary to curb prices, also being prudently flexible when the change in the price trend is firm. .
