Inflation in the Dominican Republic remains in a low trend and fell from 7.29% in May 2022 to 4.82% in August 2023, according to the Central Bank. He attributed these results to the monetary restriction program implemented by this institution and the subsidies provided by the government.
He explained that due to the convergence of inflation to the target range earlier than expected, the BCRD has room to implement monetary stimulus policies in recent months. Specifically, it has lowered the monetary policy rate by 100 basis points cumulatively since May 2023, currently setting it at 7.50% annually.
“In a complementary way, a liquidity provision program was launched through the release of legal reserves and the Rapid Liquidity Facility, which allowed the channeling of more than RD$ 127 billion this year through intermediaries of finance, which pay loans to productive sectors and households, usually at interest rates that do not exceed 9% per year, “said the BC.
CONDITIONS BECAME MORE FAVORABLE
He added that “as a result of these measures, the monetary and financial conditions of the Dominican economy have become more favorable, to the extent that the monetary policy transmission mechanism operates.”
In effect, the weighted average active interest rate of commercial banks was reduced by about 200 basis points compared to May, from 15.89% to 13.90% in the month of September 2023. Instead, the passive interest rate was reduced from 10.36% to 8.38% in the same period,” he said.
He added that “the level of liquidity in the financial system increased from about $41 billion in May to an average of about RD$71 billion between June and September 2023, which contributed to the reduction of short-term financing costs” of financial intermediaries.