Economic impact: The call for prudence regarding international interest rates
Economist Haivanjoe Ng Cortiñas, head of the Economic Affairs Secretariat of the Fuerza del Pueblo party, has made an urgent call to the Dominican authorities to adopt preventive measures in light of the complex global financial scenario. The increase in interest rates by the United States Federal Reserve (Fed) marks a turning point that, according to the expert, could directly impact the stability of the peso, inflation, and the cost of credit in the country.
The Fed’s recent decision to raise its benchmark rate to a range of 3.75% to 4.00% has narrowed the room for maneuver for local monetary policy. Ng Cortiñas warns that this adjustment should not be taken lightly, as external financial conditions have become more demanding.
Critical factors for the Dominican economy
- Exchange rate: The rise in U.S. interest rates makes dollar-denominated assets more attractive, putting upward pressure on the currency’s value against the Dominican peso.
- Inflation: A weaker peso makes imported goods more expensive. Currently, inflation stands at 5.13%, with food prices exceeding 7.0%, moving away from the official 4.0% target.
- Cost of credit: The tightening of local rates could translate into bank loans, affecting family consumption and the investment capacity of companies.
- Public debt: Refinancing and the issuance of new sovereign bonds will be more expensive, which reduces the budget allocated to social works and infrastructure.
- Remittances: A possible cooling of the U.S. labor market could impact the diaspora’s income, affecting the flow of foreign currency to Dominican households.
The Fed is making money more expensive, oil is making energy more expensive, and the dollar could make our imports more expensive. The Dominican Republic needs to anticipate these shocks, because the real risk is not in the Fed’s 25 basis point increase, but in the transmission chain that affects the exchange rate, interest rates, debt, prices, and growth.
Haivanjoe Ng Cortiñas
The need for a preventive strategy
For the economist, the solution does not lie in improvised responses, but in disciplined fiscal management. Ng Cortiñas emphasized that the country is not going through an immediate crisis, but it does face a challenge that requires protecting social spending and managing public debt with greater rigor.
Finally, the head of Economic Affairs stressed that fiscal discipline must be the strategic priority. According to his analysis, this is the only way for the Dominican Republic to face this economic cycle from a preventive standpoint, thus avoiding being forced to make forced adjustments in the future.
