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Central Bank holds its annual monetary policy interest rate at 3 percent

The Central Bank of the Dominican Republic decided to maintain its annual monetary policy interest rate at 3.00%.

Thus, the rate of the permanent liquidity expansion facility (1-day Repos) remains at 3.50% annually and the rate of remunerated deposits (Overnight) at 2.50%.

The institution explained that the decision on the reference rate is based on the exhaustive analysis of the impact of COVID-19 on economic activity and the future evolution of inflation.

The entity pointed out that, in particular, the monthly variation of the consumer price index (CPI) in January was 0.97%, while the interannual inflation associated with the analytical series of the new reference base (October 2019-September 2020), which is the most relevant for monetary policy decisions was 5.35% in January 2021.

Also, the core inflation, which excludes the most volatile components of the basic basket, reached 4.93% at the end of January 2020.

The Central Bank indicated that the recent dynamics of inflation have been influenced by cost shocks that have affected local food production, as a result of the delayed impact of climatic phenomena, in addition to increases in the prices of imported food inputs, such as wheat, corn, soybeans, and sorghum, as well as higher international oil prices.

Because of these external factors, the institution’s forecasting system indicates that inflation would be temporarily above the upper limit of the goal during the coming months, and then gradually converge to the range of 4.0% ± 1.0% during the second half of the year.

“These inflation projections, the expectations of the economic agents anchored to the goal and the strength of the macroeconomic fundamentals, provide the space for the Central Bank to maintain favorable monetary conditions in order to continue supporting the economic reactivation,” as stated by the Central Bank.

In the international environment, he said that despite the complex panorama associated with COVID-19, important advances have been made in the vaccination processes of multiple countries, contributing to more positive world growth prospects.

“In this sense, Consensus Forecasts (CFC) revised up the global growth forecasts for 2021 to 5.0%, while the International Monetary Fund (IMF) projects a world expansion of 5.5% for this year”, they added.


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