SANTO DOMINGO– The Central Bank of the Dominican Republic (BCRD) maintained its monetary policy interest rate (MPR) at 8.50% annually for the third consecutive month. The institution stated that prices for most commodities, particularly oil, have moderated, while global container shipping costs have decreased.
“"The Dominican Republic is in a good position to continue facing the challenging international landscape, taking into account the strength of its macroeconomic fundamentals and the resilience of its productive sectors," the regulatory body stated.
It indicates that inflationary dynamics have responded to the monetary tightening program and the subsidies implemented by the government. However, in December, some agricultural products with a high impact on the consumer price index were affected by adverse weather conditions, causing the monthly inflation rate for December to reach 0.96%.
Year-on-year inflation has fallen by about 181 basis points from a peak of 9.64% in April 2022 to 7.83% at year-end.
Meanwhile, core inflation, which excludes the most volatile components of the basket, has decreased from 7.29% in May to 6.56% in December 2022.
"It is important to highlight that core inflation is one of the main indicators in the decision-making of central banks and that its recent dynamics reflect the effectiveness of the economic policies adopted to counteract inflationary pressures," it indicates.
In this regard, the Central Bank of the Dominican Republic (BCRD) explains that it has increased its monetary policy rate (MPR) by 550 basis points since November 2021.
The timely monetary response has facilitated a significant increase in the nominal interbank interest rate and a sustained decrease in inflation expectations, causing the real interbank rate to be more than four percentage points above its estimated neutral level, which helps to mitigate domestic demand pressures, it adds.
Behavior in the region
In Latin America, almost all central banks have increased their monetary policy rates, placing them significantly above pre-pandemic levels, as is the case in Argentina (reference rate at 75.00%), Brazil (13.75%), Colombia (12.75%), Uruguay (11.50%), Chile (11.25%), Mexico (10.50%), Costa Rica (9.00%), Paraguay (8.50%), Dominican Republic (8.50%), Peru (7.75%), Nicaragua (7.00%) and Guatemala (4.25%).
As a result of these measures, regional inflation has begun to ease in recent months, so most central banks have paused their policy rate hike cycles, while the rest are moderating increases in their benchmark rates.
The economy closed at 4.9%
Domestically, economic activity expanded by 4.9% year-on-year during 2022, close to its potential, contributing to the strengthening of the labor market. Indeed, by the end of 2022, the number of employed individuals exceeded pre-pandemic levels, while the open unemployment rate fell from a peak of 8.0% in the first quarter of 2021 to 4.8% in the last quarter of 2022. For the current year, the Central Bank of the Dominican Republic's (BCRD) forecasting system indicates that the Dominican economy will grow by around 4.5% in 2023, remaining one of the fastest-growing economies in the region according to international organizations such as the IMF and the World Bank.
