Monday, February 3, 2020

Dominican Rep. holds rate, inflation seen in target in 2020

     The Central Bank of the Dominican Republic (BCRD) kept its monetary policy interest rate steady at 4.50 percent and forecast inflation would remain around its target range in 2020.
     BCRD, which cut its policy rate three times last year by a total of 100 basis points, said there is still uncertainty in the international environment, such as socio-political tensions and trade disputes that have slowed economic growth, and volatility in international financial markets has risen due to the potential impact of the coronavirus on the Chinese economic and global growth.
     The annual inflation rate in the Dominican Republic rose to 3.66 percent in December, the highest since August 2019, from 3.23 percent in November, closer to the midpoint of the central bank's target of 4.0 percent, plus/minus 1 percentage point.
      Inflation expectations and BCRD's forecast indicate inflation will remain around the central value of the target range this year.
     The economy continues to react favorably to last year's easing through higher consumption and investments in the second half, and showed "significant dynamism" in December,  BCRD added.
     In addition to the rate cuts, BCRD last year also released more than 34 billion Dominican pesos of legal reserves to the productive sectors.
     In its December policy statement, BCRD said the release of reserves helped boost private credit by more than 105 billion pesos, with private credit in the national currency expanding more than 12 percent year-on-year.
     It estimated growth of around 5 percent by the end of 2019 and during 2020, close to the economy's potential.
     Gross domestic product grew an annual 4.8 percent in the third quarter of last year, up from 3.7 percent in the second quarter.


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