The Association of Multiple Banks (ABA) applauded the BC's measure and noted that this increase in the monetary policy rate, accompanied by the gradual withdrawal of liquidity that has been taking place, has a transmission channel in bank interest rates, which will be reflected gradually.
Taken from Listín Diario
SANTO DOMINGO. -The changes that the Central Bank has begun to implement in monetary policy, with the 50-point increase, will be gradually reflected in the coming months in the increase of interest rates on financing, if the level of economic recovery that the country has shown so far is maintained.
Economists consulted by Listín Diario described the measure as appropriate, stating that it was to be expected that the monetary authorities would make that decision to begin regulating the economy and controlling inflation.
According to economist Miguel Collado Di Franco of the Regional Center for Economic and Social Studies (CREES), it's necessary to wait and see how and at what pace the Central Bank will manage the monetary policy rate to understand how interest rates will behave. He added that it's also important to observe the level of liquidity held by financial intermediaries, which he said is still very high.
“This measure was to be expected,” explained economist Henri Hebrard by telephone, noting that this trend has been observed for the past three or four months in other countries on the continent. He said this is due to the need to control inflation, which is not expected to happen in the short term.
He explained that this process of stabilizing the economy could now be affected by the sharp drop in financial markets due to the threat posed by a new variant of Covid-19. Hebrard interprets this as both good and bad news, because although it represents a drop in oil prices, and with it a potential decrease in fuel costs, it also anticipates a serious complication for the global economy, which is threatened by another lockdown.
As another important point, Hebrard warned that the United States is scheduled to raise interest rates, which will have an additional impact on the economy. He said that rates for the second quarter of 2022 are expected to be around 12%, as they were before the pandemic.
Similarly, economist and professor Antonio Ciriaco Cruz stated that the decision to tighten monetary policy stems from the fact that imported inflation threatens to unanchor the stability expectations that the inflation target had already created. “With this measure, the central bank is trying to accelerate the fall in inflation so that it can approach the inflation target. I think the measure is correct, although it will harm borrowers with variable-rate loans and benefit those who save and invest in financial certificates and other investment products, since higher rates improve the return on savings,” Ciriaco points out.
applauded
the Central Bank's measure and noted that this increase in the monetary policy rate, accompanied by the gradual withdrawal of liquidity that has been taking place, has a transmission channel in bank interest rates, which will be reflected gradually.
However, the ABA indicated that multiple banks maintain excellent levels of liquidity, which suggests a gradual increase in financial costs.
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Consequences for the People:
Loan Increases. Economist Henri Hebrard indicated that a direct consequence of the increase in the monetary policy rate that people will see is that their loan payments will rise, and it will also curb the devaluation of the peso, so the exchange rate could reach RD$57.00 by the end of the year, which he said was within this year's targets.
At the beginning of 2021 the peso strengthened, going from RD$58.00 to RD$56.00.
