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Tuesday, November 30, 2021

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Central Bank reports inflation decreases from 10.48 to 9.32 percent

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The Central Bank of the Dominican Republic (BCRD) reported that the monthly variation of the consumer price index (CPI) was 0.63% in June 2021, placing the accumulated inflation of the first semester of the year (January-June) at 4.01 %.

In their report on the Consumer Price Index (CPI), the monetary authorities highlighted that, as pointed out by the governor of the Central Bank, the general inflation of the last 12 months in June began a process of convergence towards the target range established in the monetary program of 4% ± 1%.

They explained that interannual inflation fell from 10.48% to 9.32% from May to June and they assure that this result constitutes a turning point downwards and is consistent with what the forecasting system of this institution had been indicating.

The monthly price report points out that the underlying inflation between June 2020 and June 2021 was at 6%. This indicator excludes some items whose prices tend to be volatile or do not normally respond to monetary conditions.

The underlying inflation isolates the behavior of foods with great variability in their prices, fuels, managed services, and transportation, as well as alcoholic beverages and tobacco, thus allowing the extraction of clearer signals for the conduct of monetary policy.

The Central Bank publication adds that the inflationary dynamics in recent months are not due to monetary or fiscal reasons, but are largely explained by high inflationary pressures of external origin.

They say they are the product of the rise in the prices of commodities and raw materials that are part of the inputs in the production chain and freight and maritime insurance due to the relative shortage of containers in major international ports.

The entity added that inflation has also been impacted by the increase in the prices of other consumer and capital goods and inputs used for construction that, although not included in the CPI household basket, indirectly affect the operating costs of companies in the economy.

A positive element that was highlighted by the BCRD is that in recent weeks there has been a reduction in the international prices of wheat, soybeans, and corn, which are important inputs for agricultural production, as well as wood and other imported goods demanded by the construction sector, which would contribute through indirect impacts to the moderation of inflationary pressures and a faster convergence path of inflation towards the target range.

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