DomRep Hikes Rate, Replaces FinMin

The Dominican Republic’s central bank tightened its rate by 100bp, bringing it to 6.0%, its highest level since February 2009. The central bank cites headline inflation, which at 6.2% in January is running above the bank’s 5-6% target for this year. “We believe the pace of future rate hikes will likely decline as annual inflation falls within the official target range,” says JPMorgan. Nomura says this is a good policy move to control aggregate demand, which is growing at a fast pace. Meanwhile, the country’s finance minister, Vicente Bengoa, has been replaced with Daniel Toribio, the general manager of state-owned Banco de Reservas and minister of finance for the first term of president Leonel Fernandez. “We view this change positively, as this is likely to result in increased coordination within the economic cabinet and improved policymaking,” says Nomura analyst Boris Segura. “The departing minister of finance had a difficult working relationship inside President Fernandez’s economic team,” Segura says. “Also, Bengoa explicitly rejected approaching the IMF until Fernandez made the decision to engage it in Q3 2009,” he adds. Bengoa had been finance minister since 2004.