At its monetary policy meeting in January 2021, the Central Bank of the Dominican Republic (BCRD) decided to maintain its monetary policy rate at 3.00% per annum. For example, the rate of the permanent liquidity expansion facility (1-day Repos) remains 3.50% per year and the rate of deposits paid (Overnight) remains 2.50% per year.
The decision on the reference rate is based on a thorough analysis of the impact of COVID-19 on economic activity and future inflation developments.
In particular, the monthly variation of the consumer price index (CPI) in December was 0.48%, while the interannual inflation related to the analytical series of the new reference base (October 2019 – September 2020), which is most relevant to monetary policy, it was 4.63% at the end of 2020, a percentage that would fall within the target range of 4.0% ± 1.0%. Likewise, core inflation, which excludes the most volatile components of the base package, was 4.77% at the end of 2020.
It should be noted that, in accordance with international guidelines, the official year-on-year inflation rate resulting from the splitting of the new CPI base with the published variations from the previous basket of goods and services (base December 2010) , Stood at 5.55% in December. 2020.
The recent inflation dynamics have been influenced by cost shocks that have affected the supply of certain foods due to climatic phenomena, in addition to the increase in imported inputs and the increase in the transport group.
It is important to note that the BCRD forecasting system indicates that inflation would be temporarily above the upper limit of the target in the first half of 2021 due to temporary cost shocks, only to converge later to the range of 4.0% ± 1 , 0% for the rest of the year.
These inflation projections and the expectations of the economic actors anchored to the target band, together with the strength of the macroeconomic fundamentals, provide room for the Central Bank to maintain favorable monetary conditions in order to continue supporting economic reactivation, the entity emphasizes in a press release.
International environment
In terms of commodities, the price of Texas Intermediate Oil (WTI) was around US $ 52 a barrel in January, showing an upward trend in the face of increased demand given the prospect of a recovery in the global economy. On the other hand, the gold price remains high, above US $ 1,800 per troy ounce, as it is used as a haven of value in a context of great uncertainty, which the Dominican Republic has benefited from the rise in the value of exports of this metal. .
In the home environment, Preliminary figures from the Monthly Indicator of Economic Activity (IMAE) indicate that the reactivation process continues to consolidate, with a variation of -1.0% year-on-year in December, a more favorable outcome than the -1.5 initially expected %, mainly due to better performance in construction, local manufacturing and free trade zones. This behavior in December reflects that the economy is on the right track, with a significant improvement of 28.8 percentage points from the decline observed in April (-29.8%), the most critical point of the crisis.