The monetary policy rate rises again

DOMINICAN REPUBLIC - In Brief 01 Feb 2022 by Magdalena Lizardo
The Central Bank decided to increase the monetary policy rate for the third time since last November. The increase has been 50 basic points, passing the rate from 4.5% to 5.0% per year. The change implies that the rate of the permanent facility for liquidity expansion (1-day Repos) increases from 5.00% to 5.50% per year and the interest-bearing deposit rate (Overnight) from 4.00% to 4.50% per year. The decision was made given the conditions prevailing in international markets (uncertainty regarding the impacts of the COVID 19 pandemic and the emergence of geopolitical tensions) and the persistence of external inflationary pressures that are more permanent than expected, in a context of high dynamism of internal economic activity that could generate overheating. Given this situation, the Central Bank considers that a more active monetary policy is required to promote convergence to the range of the inflation target of 4% ±1% in 2022. The Central Bank also reported that excess liquidity in the economy has been significantly reduced and disclosed that the growth of the economy in 2021 was 12.3% compared to 2020 and 4.7% compared to 2019.

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