BCRD increases its annual monetary policy rate from 3.50% to 4.50%

  • The Central Bank of the Dominican Republic (BCRD), at its monetary policy meeting in December 2021, decided to increase its monetary policy interest rate by 100 basis points, from 3.50% per annum to 4.50% per annum. In this way, the rate of the permanent liquidity expansion facility (1-day Repos) increases from 4.00% per year to 5.00% per year and the rate of remunerated deposits (Overnight) from 3.00% per year to 4.00% per year. 
  • This decision regarding the benchmark rate is based on a comprehensive assessment of the impact of COVID-19 on the world economy and the persistence of external inflationary pressures. In that order, the dynamics of prices continue to be affected by more permanent supply shocks than expected, associated with higher prices of oil and other important raw materials for local production, as well as the increase in global freight costs due to container shortages and other distortions in supply chains. 
  • In particular, the monthly variation of the consumer price index (CPI) in November was 1.08%, while the accumulated inflation during the first eleven months of 2021 was 7.71%. On the other hand, core inflation, which excludes the most volatile components of the basket, reached 6.63% year-on-year in November 2021, reflecting second-round effects due to higher production costs associated with external shocks. 
  • Going forward, the BCRD forecasting system indicates that, in an active monetary policy scenario, year-on-year inflation (variation of the last 12 months), which stood at 8.23% in November 2021, would converge to the target range of 4% ± 1% during the second half of 2022, at a slower rate than originally planned.

(Source: The Central Bank of the Dominican Republic)