SANTO DOMINGO – The Central Bank (BCRD) reported that the variation of the CPI (Consumer Price Index) in August was 0.21% compared to July 2022, the lowest monthly inflation in the last 27 months, placing the accumulated inflation from January-August 2022 at 5.70%.
Year-on-year inflation, measured from August 2021 to August 2022, decreased by 0.84 percentage points compared to the peak of 9.64% last April, settling at 8.80% in August, maintaining a downward trajectory in the last four months.
This downward trend in inflation reflects the effectiveness of the monetary policy measures adopted by the Central Bank and the subsidies implemented by the Government for fuels and electricity rates, as well as the initiatives to lower production costs in agriculture.
The Institution's monthly report states that with the Central Bank's recent decision to increase the monetary policy rate by 25 basis points, bringing it to 8.00% annually, there has already been an increase of 500 basis points since November 2021 to date, contributing to reducing inflationary pressures.
It should be noted that the subsidies provided by the Executive Branch, primarily for fuel and the decision to pause electricity rate adjustments, have significantly contributed to curbing price increases. Likewise, support for the agricultural sector has helped prevent higher inflation in the food category, while targeted cash assistance has allowed the most vulnerable populations to better navigate this period of global price increases.
Likewise, the Central Bank of the Dominican Republic (BCRD) points out that the positive evolution of foreign exchange generating activities has favored the relative stability of the exchange rate, with an accumulated appreciation of the Dominican peso of 8.2% as of August and 7.4% year-on-year, which helps to partially offset the impact of the imported component on prices.
The report explains that core inflation for August 2022 registered a monthly variation of 0.53%, reaching an annual rate of 7.12%, similar to those observed in June and July. It is worth noting that this indicator isolates the behavior of certain food items with highly volatile prices, as well as fuels, services with regulated prices such as electricity, transportation, and alcoholic beverages and tobacco, allowing for clearer signals to be drawn for the conduct of monetary policy.
It also highlights that the evolution of inflation in the domestic sphere, as in the rest of the world's economies, continues to be affected by external factors that have been more persistent than expected due to the duration of the Russia-Ukraine conflict, which has generated additional upward pressures on imported raw materials used as inputs for local production.
However, in recent weeks there has been a decrease in the price of these inputs, which in some cases have reached price levels lower or similar to those existing before the pandemic, due to the slowdown in global demand and improvements in the production and distribution chain, combined with a reduction in maritime transport rates that have been gradually moderating.
The monetary authority points out that, despite this recent moderation in inflationary pressures, high levels of inflation remain worldwide. Therefore, most central banks in advanced economies, such as the United States, the Eurozone, England, and Canada, continue to implement restrictive monetary measures with sequential increases in their monetary policy rates, in order to contribute to the convergence of inflation towards the objectives established in each country's respective monetary policy frameworks.
The report notes that similarly, most central banks in Latin America have moved in the same direction, with significant increases in their benchmark rates, such as: Argentina (3,150 basis points), Brazil (1,175 basis points), Chile (925 basis points), Paraguay (750 basis points), Colombia (725 basis points), Costa Rica (675 basis points), Peru (625 basis points), Uruguay (575 basis points), Mexico (425 basis points), Nicaragua (200 basis points) and Guatemala (100 basis points).
Variation by groups
Analysis of the overall CPI behavior shows that the -0.28% variation in the price index for the Food and Non-Alcoholic Beverages group is mainly due to price decreases observed in fresh chicken (-5.25%), avocados (-20.87%), garlic (-6.44%), chili peppers (-4.54%), and oranges (-8.47%), while other food items registered price increases such as onions (8.82%), cassava (5.08%), pineapple (16.07%), green plantains (1.55%), purified water (0.77%), passion fruit (9.93%), eggs (0.75%), soft drinks (0.69%), and rice (0.23%).
Other groups that contributed to August's inflation were Miscellaneous Goods and Services (0.92%), Education (2.69%), Restaurants and Hotels (0.50%) and Furniture and Household Goods (0.59%).
The 0.92% growth experienced by the CPI of the Miscellaneous Goods and Services group is mainly explained by price increases in personal care services, such as men's haircuts (1.47%), hair washing and styling (0.90%) and personal care items (1.04%).
The CPI for the Education group rose by 2.69%, driven by a 3.00% increase in university tuition costs and higher private school fees, a typical trend due to the seasonal increase in school enrollment during this period. Specifically, tuition fees for primary (2.65%), secondary (2.79%), and preschool (2.93%) education services increased. Other school-related expenses that showed positive price changes included books (1.09%), school transportation (15.57%), notebooks (2.74%), and school uniforms (1.79%).
Regarding the 0.50% increase in the CPI for the Restaurants and Hotels group, this is mainly due to price increases in prepared food services outside the home, such as daily specials (0.43%), chicken (0.67%), pizza (1.16%), sandwiches (0.65%), and grocery delivery with side dishes (0.27%). Meanwhile, the 0.59% variation in the CPI for the Furniture and Household Goods group is largely due to increases in the price of goods and services for home maintenance (0.79%).
