Dominican Republic: Inflation rises in August; Central Bank stays put in September
Consumer prices rose 0.34% in August over the prior month, down from July’s 0.47% uptick. August’s increase was driven by higher prices for food and non-alcoholic beverages, and education.
Inflation rose from 1.4% in July to 1.7% in August, but remained below the Central Bank’s inflation target range of 3.0%–5.0% for the tenth straight month. Core inflation—which excludes volatile items such as certain types of food, fuel and administered prices—inched up to 2.1% from July’s 2.0%. Low oil prices continue to put a dampener on inflation, although recent monetary easing has helped stoke price pressures somewhat in recent months.
At its 30 September monetary policy meeting, the Central Bank (BCRD) left the policy rate unchanged at 4.50%. This came after 100 basis points of easing in June-August in order to lift the economy out of an economic rut. Given the recent uptick in inflation and recovery in economic activity in July and August, the BCRD felt that further easing was not required at the current juncture.
In its communiqué, the Bank remained dovish, highlighting it would be alert to “moderating global economic activity as well as internal and external uncertainty, and the impact on demand”. This suggests further loosening is possible in the coming months, particularly given a rate cut by the U.S. Federal Reserve in September and the potential for further U.S. rate cuts in coming months. Moreover, the BCRD’s governor recently explicitly mentioned the possibility of more loosening, given that the Dominican Republic’s policy rate is still higher than that of many regional peers.