Monetary policy rate increases from 3.50% to 4.50% annually

The Central Bank, at its December monetary policy meeting, increased its monetary policy interest rate by 100 basis points, from 3.50% per annum to 4.50% per annum.

In this way, the permanent liquidity expansion facility rate (1-day Repos) increases from 4.00% per year to 5.00% per year and the rate of paid deposits (Overnight) from 3.00% per year to 4.00% per year.

This decision regarding the Reference rate It is based on a comprehensive assessment of the impact of COVID-19 on the world economy and the persistence of inflationary pressures from external sources.

In a commune, the Central Bank explained that the Price dynamics continue to be affected by supply shocks that are more permanent than anticipated, associated with higher prices of oil and other important raw materials for local production, as well as the increase in global freight costs due to the shortage of containers and other distortions in the supply chains.

In this context of more persistent inflationary pressures Considering the good rhythm of the economic recovery, the Central Bank is implementing a plan towards normalizing its monetary policy.

The monetary authority also explained that the increases in the BCRD’s monetary policy rate of 50 basis points in November and 100 basis points in this month of December will place said reference rate at 4.50% per annum, a level at which it was prior to the pandemic.

The implementation of these measures has as objective to facilitate the convergence of inflation to the target, to keep the expectations of economic agents anchored and to prevent the risk that an overheating of the economy would be generated in the future, which could cause an overflow of inflationary pressures and a domestic macroeconomic imbalance.

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In the international environment, the economic outlook remains positive, although The uncertainty generated by the rate of global COVID-19 infections persists and disruptions in supply chains. In that sense, Consensus Forecasts forecasts world growth of 5.6% by 2021 and 4.2% by 2022.

The Central Bank reaffirmed its commitment to direct monetary policy towards achieving its inflation target and the proper functioning of the financial and payment systems, for which it indicated that it will continue to monitor the macroeconomic environment and the evolution of pressures. inflationary, in order to adopt the necessary measures in the face of factors that could put price stability at risk.

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