The Central Bank leaves its interest rate at 5.50%

The Central Bank of the Dominican Republic (BCRD) reported that it decided to maintain its monetary policy interest rate at 5.50% per year.

This decision is based, according to a statement from the agency, on an exhaustive evaluation of the recent behavior of the world economy, which has been influenced by the increase in international uncertainty derived from the recent geopolitical conflicts and the global cost shock.

Price dynamics continue to be affected by external shocks that are more persistent 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 transport and other disruptions in supply chains.

The note reports that the monthly variation of the consumer price index (CPI) in March 2022 was 0.67%; while year-on-year inflation, that is, in the last 12 months, stood at 9.05%.

In this sense, the BCRD forecasting system indicates that, in an active monetary policy scenario, inflation would gradually converge to the target range of 4% ± 1% during the monetary policy horizon, but at a slower rate than expected. , specifies the institutional statement.

It adds that in addition to the monetary normalization policies, the fiscal measures that are being implemented to mitigate the increase in the prices of raw materials and the stability observed in the foreign exchange market are elements that would facilitate the convergence of inflation to the target.

Measures

The note highlights that since the end of 2021 the Central Bank has been implementing measures to counteract external shocks on prices and contribute to the convergence of inflation to the target range, in a context of economic dynamism.

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In this sense, he says, the agency has increased its monetary policy rate by 250 basis points from November 2021, to its current level of 5.50% per year, in line with the cycle of increases in interest rates at the international level. .

In a complementary manner, the BCRD has significantly reduced the excess liquidity of the financial system, through open market operations and the gradual return of the resources that had been granted during the pandemic.

Growth

The BCRD highlights that in the domestic environment the good performance of the economy has been maintained during this year, registering a growth of the Monthly Index of Economic Activity (IMAE) of 6.4% in March, which, together with the expansions of 6.3% in January and 5.8% in February, accumulate a growth of 6.1% during the first quarter of this 2022.

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