Given the current global context regarding inflation, Nicaragua has set the Monetary Reference Rate (TRM) at 7.0%, with the objective of continuing to guarantee a monetary balance consistent with the stability of the national currency.
The announcement was made by the Central Bank of Nicaragua (BCN) which detailed that the Board of Directors of the financial institution, «decided to keep the Monetary Reference Rate (TRM) at 7.0 percent».
This is the Monetary Reference Rate
In its statement, the Central American banking institution explains that the TRM is the interest rate used by the NCB as a reference, to signal the cost in cordobas of monetary liquidity operations at 1 day.
In addition, it also emphasizes that the TRM is established in accordance with the evolution of international interest rates and domestic monetary conditions, in keeping with the fulfilment of the NCB’s fundamental objective, to promote the stability of the national currency and the normal development of internal and external payments; as well as to support the liquidity management of the financial system and maintain conditions conducive to financial intermediation.
The NCB authorities base their decision mainly on the fact that in the international environment, «inflation continues to show signs of abatement and risks to its outlook have moderated, although it remains above target ranges and shows some persistence in the food price component, which keeps the world’s central banks in a tight monetary policy stance, but entering a phase of moderation or pause on benchmark interest rate increases».
It also explains that «while persistent price pressures and labor market soundness in advanced economies continue to push the cycle of interest rate hikes, financial stability considerations will influence monetary policy decisions».
In this global financial context, together with other elements of the economic and geopolitical conjuncture, risks to the economic outlook continue to decline and a slowdown in world economic growth is expected, which, however, shows signs of resilience in some economies, warned the Nicaraguan Central Bank.
Stable growth trajectory
The NCB considered that in the domestic context, economic activity maintains its growth trajectory, supported by good external demand for exports, the dynamism of credit to the private sector and the growth of other external flows. Thus, the performance of economic activity has had an impact on the labor market, which continues to reflect a low rate of unemployment and stability in formal employment, with a lag in the recovery in labor participation.
In this sense, he pointed out that domestic inflation has moderated, but continues to reflect signs of persistence in the prices of food and related services, pressured by external factors that have affected production costs.
However, inflation is expected to decline gradually, in line with regional and global developments. In addition, the Government’s subsidy policy continues to contribute to price stability. Under this environment, the NCB’s monetary policy has been balanced, ensuring that the monetary balance is consistent with the stability of the currency and the support of the exchange rate, increasing the level of international reserves, the public report said.
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The Central Bank of Nicaragua also reported that it resolved to keep the rates of the Monetary Reports and Deposits windows (both within 1 day for monetary operations in cordobas without maintenance of value) at 8.25 percent and 5.75 percent, respectively.
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It also maintained stable interest rates on related monetary operations, such as the 7-day Money Report window, 7-day Money Deposit window rates in 7-day cordobas, 14 and 30 days and the exchange rates of Monetary Deposits in dollars at 1, 7, 14 and 30 days.
