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Central Bank raises its annual interest rate from 3.50% to 4.50%

Santo Domingo, RD.

The Central Bank increased its interest rate of monetary policy by 100 basis points, from 3.50% per annum to 4.50% per annum. Thus, the permanent facility rate of liquidity expansion increases from 4.00% per annum to 5.00% per annum and the rate of remunerated deposits (Overnight) from 3.00% per annum to 4.00% per annum.

This decision regarding the reference rate is based on a comprehensive assessment of the impact of Covid-19 on the world economy and the persistence of inflationary pressures of external origin.

The causes
Price dynamics continue to be affected by supply shocks that are more permanent than expected, associated with higher oil prices and other important raw materials for local production, as well as the increase in global freight costs due to the shortage of containers and other distortions in supply chains.

In particular, the monthly variation of the consumer price index (CPI) in November it was 1.08%, while accumulated inflation during the first eleven months of 2021 was 7.71%.

Core inflation, which excludes the most volatile components of the basket, reached 6.63% year-on-year in November 2021, reflecting second-round effects due to higher production costs associated with external shocks.

The Central Bank’s forecasting system indicates that in an active monetary policy scenario, the interannual inflation, which stood at 8.23% in November 2021, it would converge to the target range of 4% ± 1% during the second half of 2022, at a slower pace than originally anticipated.

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