Dominican Republic maintains its benchmark interest rate at 3%

RIO DE JANEIRO, BRAZIL – The Dominican Republic announced on Friday that it maintains its monetary policy rate at 3.00%, after an “exhaustive analysis” of the impact of covid-19 on economic activity and the future evolution of inflation in the country.

The Dominican Central Bank added that the rate of the permanent liquidity expansion facility (repos) remains at 3.50% and the rate for remunerated deposits (overnight) at 2.50%.

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The agency said, in a statement, that the monthly variation of the consumer price index (CPI) in June was 0.63%, while accumulated inflation during the first half of 2021 was 4.01%.

For the regular entity, the recent inflation dynamics have been affected by transitory cost shocks associated with increases in the prices of imported food inputs and higher international oil prices, and global freight costs.

“Nevertheless,” the institution highlighted, “a significant decline has recently been observed in the international prices of some agricultural goods from the highs reached in May, such as corn, wheat, and soybeans, as well as construction inputs, such as wood and steel. These lower external prices should contribute to attenuate domestic inflationary pressures, provided that there are no episodes of excessive volatility in oil prices in the coming months.”

In this regard, the BCRD’s forecasting system indicates that inflation will continue to moderate in the coming months, gradually converging to the target range of 4% ± 1%.

The Central Bank said yesterday that the Dominican Republic’s economy grew 13.3% in the first six months of 2021, compared to the same period in 2020.

This increase exceeds the expectations “of what we had projected for the closing of the first half of 2021,” said at a press conference the governor of the institution, Héctor Valdez, who put the increase in June, the last month analyzed, at 12.7%.

The activities with the greatest expansion were construction (42.2%), free zones (31.7%), local manufacturing (14.3%), transportation and storage (13.7%), mining (11.4%), and commerce (10.7%).