Central Bank experts forecast that prices will begin to decrease as of this month.
Experts of the Central Bank of the Dominican Republic (BCRD) assure that annualized inflation reached its highest point in May, when it reached 10.48% concerning the same month of 2020, and forecast that as of June, it will begin a process of deceleration until it gradually comes the target range of 4.0% ± 1.0%.
The specialists consider that the rise in prices that has been registered this year is transitory and, therefore, they argue that a monetary policy reaction is neither prudent nor necessary.
“Taking into consideration the transitory nature of the inflation shock, which also includes a high imported component, a restrictive monetary policy reaction that could have adverse effects on the economic recovery process would not be appropriate or necessary at the present time,” state the analysts in an article entitled “Some remarks on the recent dynamics of inflation in the international and domestic context,” published this Sunday by the agency.
The authors also highlight the expectations of the country’s economic agents remain adequately anchored to the BCRD’s inflation target. Another positive element is that since May, the international prices of agricultural goods began to decrease, which will also help moderate the pressures inflationary in the coming months.
They cite falls in the prices of wheat (-8.8%), soybeans (-11.6%), and corn (-10.1%) from the levels of early May 2021.
However, the experts favor some proposals presented at the working table due to the international price crisis carried out by the President of the Republic, Luis Abinader, on June 21.
They agree with the proposal to set the value of freight and insurance for imported goods at the pre-pandemic average levels and use these as a reference for the payment of tariffs and ITBIS, thus reducing the cost of five imported goods.
They specify that the President indicated that the effectiveness of this transitory measure would depend on the lower costs of liquidating goods in customs being transferred to the final consumer, reflected in a fall in domestic prices.
Another way to cover a large part of the increase observed in the basic food basket this year could be to grant an extraordinary bonus to the most vulnerable families, to be determined based on the availability of budgetary resources. This proposal was made by the Governor of the BCRD, Héctor Valdez Albizu.