New increase in the monetary policy rate in a context of inflationary pressure and strong economic recovery

DOMINICAN REPUBLIC - In Brief 30 Dec 2021 by Magdalena Lizardo

The Central Bank of the Dominican Republic announced an increase in the monetary policy rate of 100 basis points, placing said rate at 4.5% per year. It is the second time that the monetary policy rate has increased after the reductions experienced during 2020 in order to support the economic recovery process in the context of the COVID-19 pandemic. On March 19, 2020 the monetary policy rate was reduced from 4.5% per year to 3.5% per year, to be reduced again to 3.0% on August 31, 2020. After remaining constant for almost 15 months, on November 24 2021, the monetary policy rate increased by 50 basis points and settled at 3.5% per year. With the decision adopted today, December 30, 2021, the Central Bank returns to the existing monetary policy rate prior to the start of the pandemic. These decisions are framed within a change in the stance of monetary policy, in which greater concern has begun to prevail to face inflationary pressures in the context of a strong recovery in economic growth and rising prices at a global level. Until November 2021, interannual inflation was 8.23% and interannual economic growth amounted to 13.1%, resulting in cumulative growth from January to November 2021 of 12.5%.

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