The behavior of the active rateswhich are used for the loansremains practically the same this year in relation to the same period in 2022, despite the fact that financial intermediation sectors projected increases for June, when the context was different, and many of the financing with facilities end their terms.
The Loan users are on the lookoutdue to the fact that it is not clear if the monetary authorities will once again keep the reference rate (Monetary Policy Rate) invariable, which up to now has remained at 8.50% since October 2022 or, more likely, from June onwards a cycle of reduction.
In addition, it is not clear whether the world benchmark, the FED (United States Federal Reserve) will move its rate againeven at the expense of low demand for international trade and debt problems.
At the end of the first quarter of this year 2023, the financing for commercial activities were carried out with rates of 13.97%, personal consumer loans, which are the most expensive credits in the system and which involve the credit card financingamong other uses, were financed with interest of 19.91% and mortgages and/or development at 12.65%.
While in the first 16 days of May, the behavior was 13.93% for trade, 20.62% for consumption and/or personal, and 12.56% for mortgages and/or development, for an average of 12.34%. As of May 18, the weighted average was 12.36%.
This is, 14.03% in commerce, 20.66% in consumption and/or personal loans and 12.51% for mortgage financing and/or development.
The average of the interbank rates in April of this year was 11.90%. The average active rate closed at 15.87% and the passive rate at 9.99%, according to the Central Bank.
The central banks use the interest rate as a resource to control inflation and, in the Dominican case, the Monetary Board was raising it while the price indicator was rising. Today inflation is at 5.15% and it is expected to close at 5% in May, so if it continues to drop in June it would be nearing the target range of 4% and there would be no need to raise, but to lower the TPM before that closes the year 2023.
Worldwide, The agents are waiting for the course that the FED will follow. Analysts estimate that if an increase occurs, it would be very pyrrhic, since trade uncertainty continues and demand continues to fall, and, at times like this, an increase in interest rates will further slow down the growth of an economy that is growing little and is is highly indebted like the US.
In the opinion of the economist and dean of the Faculty of Economic and Social Sciences of the Autonomous University of Santo Domingo (UASD), Antonio Cruz Ciriaco, the future behavior of active and passive interest rates are highly subject to variations or maintenance of the Monetary Policy Rate set by the Central Bank.
“I think that the conditions are there or are very close for the Central Bank to change its position in its monetary policy. So, reduce your reference or monetary policy rate by 50 basis points, which induces the formation of lower market interest rates,” he said.
To the extent that the Monetary Policy Rate is reduced, he added, this would lead to a decrease in the active interest rate. The studies we have carried out indicate that a reduction of 50 basis points would bring the active interest rate to 13.9% average in a period of one month.
But if the Central Bank does not change its position in its Monetary policy, the Active Interest Rate will remain in the vicinity of 15.84%. For the former president of the Dominican College of Economists (Codeco) and current coordinator of the INTEC Economics career, Rafael Espinal, interest rates remain relatively high in the country’s financial system and the TPM is not transmitted automatically in the market, because it presents a lag in time.
Besides, the influence of Treasury and Central Bank bonds must be taken into accountissued through public auctions.
“Obviously, inflation is already subsiding, it has subsided substantially and is approaching the Central Bank’s goal, and inflation rates in the United States have also maintained a moderate pace, so these factors will be influencing the next decisions of both the Monetary Board as well as the financial sector”, indicated Espinal.
The TPM is not transmitted automatically in the market, because it presents a lag in time, says Espinal.