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SANTO DOMINGO, Dominican Republic .- At its monetary policy meeting of October 2018, the Central Bank of the Dominican Republic (BCRD) decided to maintain its policy interest rate. 5.50% per annum. [19659002] The decision to leave the reference rate unchanged is based on a detailed badysis of the risk balance of inflation forecasts, including quantitative and qualitative information from the relevant international environment, indicators macroeconomic conditions, market expectations and prospects. medium-term projections of this set of variables.
Cumulative inflation stood at 1.52% in September, while year-to-year inflation from September 2017 to September 2018 decreased for the third consecutive month after 3, 87% in August to 3.29% in September, within the target of 4.0% ± 1.0% set in the monetary program.
Underlying inflation, linked to monetary conditions, fell to 2.53% in one month in September. The forecasting system indicates that on average inflation would remain in the target range within the two-year monetary policy horizon.
In the external context, the economic prospects of the Dominican economy are influenced by the normalization of monetary policy in the United States of America, the appreciation of the dollar in international markets and the gradual rise in oil prices. Other factors, such as increased volatility in international financial markets, global trade tensions and growing uncertainty in some emerging economies also contribute to what is seen as a changing international scenario.
according to Consensus Forecast, the global economy is expected to grow 3.2% in 2018 and 3.1% in 2019, driven by the continued dynamism of the US economy, which , 9% and 2.6% during these years.
In the context of full employment and higher inflation for the programmed target, the process of increasing the benchmark interest rate of the Federal Reserve Bank should continue. It should be noted that the monetary policy normalization process is accompanied by an expansive fiscal policy that has increased the country 's fiscal deficit, which would represent around 4.0% of GDP. here 2018.
the economy of the community of countries of the euro zone (ZE) would increase by 2.0% in 2018 and 1.8% in 2019. Given that inflationary pressures remain moderate in In these countries, the monetary policy of the European Central Bank would remain expansive in the medium term, which would help to increase the interest rate differential with the United States and to encourage a greater appreciation of the dollar.
The economic situation in emerging markets is more uncertain, with a slowdown observed in some weak macroeconomic fundamentals. However, some emerging economies are showing significant momentum, such as India and China, whose economies would grow in 2018 by 7.3% and 6.6%, respectively. In the case of Latin America, growth forecasts for countries such as Venezuela, Brazil, Argentina and Nicaragua have been corrected downwards. On the other hand, the growth prospects of other economies in the region with strong fundamentals such as Chile, Peru, Colombia and the Dominican Republic have been revised upwards.
On the domestic front, economic activity continues to exceed its potential. . Indeed, real gross domestic product grew 6.9% in the first nine months of 2018, thanks to growth of 7.3% from one year to the other in the third quarter. According to the Central Bank's forecasting system, economic activity would continue to exceed its potential during the current year, closing in 2018 with growth of about 6.5%. In line with this trend, credit to the private sector in national currency continues to increase by almost 12% compared to October, while monetary aggregates show growth rates corresponding to the same period of last year. estimated expansion of nominal GDP.
In terms of fiscal policy, the evolution of public finances over the course of the year suggests that the central government would close in December close to the deficit target set in the 2018 budget. Starting in September, the rate of revenue growth is two digits, while public spending increases moderately. In the foreign sector, currency-generating activities maintain a remarkable dynamism, anticipating that the current account deficit will be slightly higher than -1.0% of GDP at the end of the year, linked to the rise in oil prices. The good performance of the external sector has facilitated the build-up of international reserves, which remain at levels above US $ 7 trillion, which contributes to the relative stability of the foreign exchange market.
The process of consolidating public finances The current account deficits, in a context of strong economic growth and controlled inflation, reflect our sound macroeconomic fundamentals. Indeed, the country risk perception indicator for the Dominican Republic, calculated by the JP Morgan company (EMBI), was at the end of October at around 100 basis points below the risk indicator for the country. 39 Latin America. This is the level of risk relative to the lowest region in history, which reflects investor confidence in the Dominican economy, based on the strength of its foundations.
The Central Bank of the Dominican Republic reaffirms its commitment to Conduct monetary policy to achieve the goal of inflation and maintain macroeconomic stability, as well as to ensure the smooth functioning of the financial and payment systems. In this sense, the monetary institution remains attentive to the evolution of the normalization of monetary policy in the United States and its impact on the interest rate differential with the Dominican Republic, as well as on the price of oil and gas. the dynamics of the dollar in the United States. international market and is willing to react quickly to any factor jeopardizing the respect of its inflation objective.
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