Monday, September 3, 2018

Dominican Rep. holds rate but ready to normalize policy

     The Central bank of the Dominican Republic (BCRD) left its monetary policy rate at 5.50 percent but said it is prepared to continue normalizing its monetary policy in coming months to avoid any significant deviations in the differential between its own interest rates and those of the United States.
      The BCRD raised its rate by 25 basis points in July - its first change in rates since a rate cut in August 2017 - and said its monetary policy was following the future path of interest rate hikes as outlined by the U.S. Fed at a time when the U.S. economy is operating at full employment and growth that is close to its potential.
      In July BCRD said it would continue to withdraw monetary stimulus from last year when the rate was cut by a net 25 points.
      Inflation in the Dominican Republic eased to 4.43 percent in July fro 4.63 percent in June, within the central bank's target range of 4.0 percent, plus/minus one percentage points.
      In a statement from the Aug. 31 meeting of on monetary policy published today, the central bank said forecasts indicate inflation, on average, will remain within the target range over a 2-year horizon.
      Economic activity is continuing to evolve favorably, BCRD said, saying the economy grew by 6.7 percent in the first half of the year and activity should continue to be above potential this year.
      By the end of this year economic growth should beer in the range of 6.0 to 6.5 percent, and loans to the private sector in local currency grew around 12 percent year-on-year in August, BCRD said.
      Fiscal revenues have topped budgets so far this year while spending has been moderate, allowing for a small surplus of 0.1 percent of Gross Domestic Product in the first half. This would meet a 2018 budgeted deficit target of 2.2 percent of GDP.
      The Dominican peso has continued its steady depreciation against the U.S. dollar this year and was trading at 50.23 to the dollar today, down almost 5 percent this year.


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