Monday, July 31, 2017

Dominican Rep. cuts rate 50 bps as inflation below target

     The Central Bank of the Dominican Republic (BCRD) cut its monetary policy rate by 50 basis points to 5.25 percent as inflation is forecast to approach the lower limit of the bank's target range in the monetary policy horizon.
     It is BCRD's first change in rates since a 25 basis point rate hike on April 2 when inflation was accelerating.
     But since then, the international environment has changed, the central bank said, pointing to a moderation in oil prices and a more gradual process of normalization of U.S. monetary policy, with the Federal Reserve now expected to maintain an accommodative policy stance the rest of the year.
     In addition, the International Monetary Fund (IMF) downgraded U.S. growth for 2017 and 2018, arguing there would be no fiscal stimulus in the short term.
      Headline inflation in the Dominican Republic declined to 2.55 percent in June from 3.11 percent in May and below the central bank's target range of 4.0 percent, plus/minus 1 percentage point.
      Underlying inflation in June was 2.18 percent, the BCRD added.
      Preliminary data for the second quarter show that economic growth is "significantly below its potential," the central bank said, affected by a sharp slowdown in private investment and a significant reduction in public spending.
      Total loans to the private sector are also growing slower due to lower demand for credit.
       The central bank said it had also reduced its legal reserve ratio by 2.2 percentage point to help stimulate economic activity through credit and help economic growth and inflation.
      Gross Domestic Product in the Dominican Republic grew by an annual rate of 5.2 percent in the first quarter of this year, down from 5.9 percent in the previous quarter.



Post a Comment