Inflation in Dominican Republic

Dominican Republic - Inflation

Inflation rises in March, Central Bank leaves rates unchanged

Consumer prices rose 0.65% in March over the prior month, up from February’s 0.37% increase. According to the Central Bank, March’s increase was driven largely by higher food and transport costs, with the latter impacted by government price adjustments to fuel.

Inflation rose from 1.2% in February to 1.5% in March amid an uptick in global oil prices, but remained below the Central Bank’s inflation target range of 3.0%-5.0% for the fifth straight month. Core inflation—which excludes volatile items such as certain types of food, fuel and administered prices—dipped from 2.3% to 2.2%.

At its 30 April monetary policy meeting, the Central Bank (BCRD) kept its policy rate at 5.50%. Despite current below-target inflation, the Bank continued to expect inflation to gradually converge to the center of the target range over the next two years, while economic activity is robust, meaning a rate cut was not warranted. On the flipside, more dovish stances by global central banks—particularly the U.S. Federal Reserve—and solid international reserves have reduced the need for the BCRD to hike rates.

In its communiqué, the Bank retained its neutral bias and gave no explicit guidance on the future direction of monetary policy. The Bank highlighted that it would pay particular attention to international oil prices, global financial conditions and extreme weather events. Given inflation is low and external pressures on the BCRD to tighten its stance have diminished, interest rates are unlikely to rise far from their current level, and a rate cut is now possible later this year.

Last month, FocusEconomics Consensus Forecast participants expected inflation to end 2019 at 3.6%. The panel projected inflation to end 2020 at 3.5%. A new Consensus Forecast will be published on 14 May.