The Central Bank of the Dominican Republic (BCRD) left its monetary policy rate steady at 5.50 percent and said it expects inflation to gradually converge to its target range over the next 2 years after inflation in December fell to the lowest rate in 34 years.
BCRD, which has maintained its rate since raising it by 25 basis points in July 2018, added economic activity was continuing to grow above its potential, amid low inflationary pressures, and estimated economic growth of 7.0 percent in 2018, driven by investment and private consumption.
In line with this strong economic activity, the central bank said credit to the private sector in local currency was up an annual 11.0. percent in January.
Headline inflation in the Dominican Republic dropped to 1.17 percent in December from 2.37 percent in November, mainly due to lower fuel prices from the fall in oil prices.
The December inflation rate is not only the lowest in 34 years, but below the central bank's target range of 4.0 percent, plus/minus 1 percentage point, and below BCRD's projection from December 2017 when it forecast that inflation would end 2018 around 1.3 percent.
Core inflation, which excludes some volatile agricultural products, alcohol, tobacco, fuel and managed transportation, ended last year at 2.47 percent, down from 2.54 percent in November.
As in December, BCRD said it was paying attention to the evolution of the normalization of monetary policy in the U.S., the behavior of the U.S. dollar and the price of oil, and stands ready to react in a timely manner before any factors generate deviations to its inflation target.