In macroeconomic terms, 2022 was a complex year. The inflationary crisis governed the decisions of central banks and governments around the world, especially those of Latin America. The rise in the prices of main products caused the monetary authorities to adopt countercyclical measures, among them the increase in the monetary policy rate (TPM) to restrict domestic demand. Other decisions were fiscal in nature.
In the current scenario, the first months of 2023 reflect a more “stable” situation in most countries in the region. In Dominican Republic the TPM has been at 8.50% per year for six months. Between May 2021 and the same month of 2023, the interest rate has gone from 3% to the current one, in some 10 almost consecutive increases, which evidenced a change in the attitude of the monetary authorities in the face of inflationary pressures.
In Latin America, the banks central banks have also kept policy rates above pre-pandemic levels, as is the case with Argentina, whose reference rate is located at 91.00% in April 2023, the highest in the region. While, Brazil places its TPM at 13.75%, Colombia at 13.25%, Uruguay at 11.25%, Chili at 11.25%, Paraguayan at 8.50%, Peru at 7.75%, Nicaragua at 7.00%) Guatemala at 5.00% and Mexico at 11.25%.
According to the Dominican monetary authority, these rates have caused regional inflation to moderate in recent months. This, in turn, motivates most central banks to “brake” the cycles of MPR increases, which they had been adopting after the convulsive effects of the invasion of Russia to Ukraine and the impact of monetary expansion regarding the pandemic.
At the local level, the Central Bank maintains that the monthly variation of the consumer’s price index (CPI) was 0.24% in April, contributing to annualized inflation of 5.15%, while the accumulated inflation is 1.21%.
According to projections of the International Monetary Fund, the challenge of the coming months could be focused on economic growth. Therefore, the trend of the rise in the MPR would be decreasing.
In this regard, BC Governor Héctor Valdez Albizu recently reported that, according to the latest projections, at the end of May inflation would enter the target range of 4% ± 1%, earlier than expected.
The Central American economies, with the exception of Honduras, have adopted a restrictive monetary policy. Costa Rica, with inflation set at 2.443% (below its target range), after increasing its TPM to 9.0% between September and January of this year, decided to lower it to 7.50% in May 2023.
It’s so much so Costa Rica It has had one of the most drastic changes, either to lower it or increase it. While Honduras maintains its rate at 3.00%, in force since November 2020, according to the Central Bank of Honduras. He savior and Panama they are dollarized economies and, therefore, do not make monetary politics.