Tuesday, February 1, 2022

Dominican Rep. raises rate 3rd time as it normalizes

     The central bank of the Dominican Republic raised its monetary policy rate for the third time, saying this move is part of a normalization of monetary policy aimed at moderating shocks on prices and help inflation converge toward the target range within the context of "highly dynamic economic activity."
     The Central Bank of the Dominican Republic (BCRD) raised its monetary policy interest rate by a further 50 basis points to 5.0 percent and has now raised the rate 2 percentage points following rate hikes in November and December last year and Jan. 31, 2022.
     BCRD said it had also significantly reduced the excess liquidity in the financial system, especially through open market operations, to mitigate additional inflationary pressures and prevent an overheating of the economy in the future.
     The central bank noted headline inflation ended 2021 at 8.50 percent and core inflation hit 6.87 percent, which reflects the second-round effects on production associated with supply shocks.
    BCRD said it expectations inflation to converge to its target range of 4.0 percent, plus/minus 1 percentage point during the monetary policy horizon, but this is slower than originally expected.



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