SANTO DOMINGO.– The Central Bank of the Dominican Republic (BCRD) reported yesterday, Tuesday, that it is maintaining its monetary policy rate at 5.25%, as well as the liquidity expansion rate (1-day repos) at 5.75%, and the remunerated deposit rate (overnight) at 4.50%.
In a statement, the agency explained that to maintain the range unchanged, it considered the gradual recovery of economic activity during the first quarter, as inflation expectations remain anchored to the target.
He reiterated that year-on-year inflation moderated to 4.67% in February, remaining within the target range of 4.0% ± 1.0%, as food supply conditions have normalized following the weather events at the end of last year.
Underlying inflation remains within the target range, standing at 4.76% year-on-year over the same period.
However, the Dominican Central Bank noted that the evolution of the armed conflict in the Middle East represents a negative supply shock by increasing the prices of imported raw materials and strategic inputs for national production, as well as higher maritime transport costs for goods.
In response to this situation, the document continued, the Government announced a plan to mitigate the impact on the Dominican economy through partial subsidies for fuels, other products, and social assistance to the vulnerable population; while maintaining the execution of capital expenditures.
Inflation and supply shock
In this context, the Central Bank's forecasting system indicated that year-on-year inflation would continue to be affected by supply shocks in the short term, considering the effects of higher oil and derivative prices.
"It is important to note that the outlook is conditioned by a high level of uncertainty, presenting risks associated with the duration and magnitude of the conflict in the Middle East," the report added.
The Dominican Republic's monetary policy authority stated that, given this changing landscape, it will continue to "monitor" the evolution of international conditions, with the aim of promptly adopting the necessary measures to contribute to achieving the inflation target.
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