Dominican Rep. holds rate, says economy still healthy

    The central bank of the Dominican Republic left its monetary policy rate at 5.50 percent, saying economic activity was improving with solid macroeconomic fundamentals that are creating favorable conditions for accumulating international reserves and promoting a stable exchange rate.
    The Central Bank of the Dominican Republic (CBRD) said the growth rate of public spending had slowed markedly in the second half of the year, indicating a more moderate fiscal policy despite work to rebuild parts of the country that were affected by recent floods.
    In addition, the current account deficit is expected to end the year between 1.7 percent and 1.9 percent of Gross Domestic Product showing that the economy remains healthy. In 2015 the current account deficit narrowed to 1.9 percent of GDP from 3.3 percent in 2014.
    The CBRD added the monthly indicator of economic activity grew by around 6.4 percent in the first 11 months of the year, the highest growth rate in Latin America for the third year in a row.
    The Dominican Republic's GDP grew by 5.97 percent in the second quarter from the first quarter for annual growth of 8.70 percent, up from 6.1 percent.
    The CBRD raised its rate by 50 basis points in October in a preventative move reflecting inflation, the expected rate hike by the U.S. Federal Reserve, the trend toward higher oil prices and uncertainty in international financial markets.
    Headline inflation declined to 0.88 percent in November, the lowest rate since September 2015, from 0.91 percent with underlying inflation of 1.79 percent as inflation remains well below the lower limit of the central bank's target of 4.0 percent, plus/minus 1 percentage points.
    The exchange rate of the Dominican peso was trading at 46.3 to the U.S. dollar, down 1.7 percent in 2016.

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