Dominican Republic: Central Bank pauses tightening cycle
November 30, 2010
In October, consumer prices increased 0.67% over the previous month, which was down from the 0.77% rise recorded in September. The monthly increase reflected higher prices for transport as well as for housing. As a result of the monthly price rise, annual headline inflation jumped from 5.7% in September to 6.2% in October. Despite the surge in inflation, at the latest meeting on 29 November, the Central Bank decided to keep the monetary policy rate unchanged at 5.00%. The move marks a pause in the tightening cycle, which began in September 2010, after the Central Bank had previously refrained from raising interest rates since October 2009. According to monetary authorities, the effects of the previous interest rate hikes are already passing through to the financial sector. Moreover, inflation remains within the 6.0-7.0% target-range set for 2010. This contributed to the Central Bank's decision to leave rates unchanged in October.
Author: Armando Ciccarelli, Head of Data Solutions