Dominican Republic Monetary Policy February 2023

Dominican Republic: Central Bank stays put for a fourth consecutive time in February

At its meeting on 28 February, the Central Bank of the Dominican Republic (BCRD) opted to leave the policy rate unchanged at 8.50%. The move marked the fourth consecutive hold since November, following a cumulative 550 basis points of hikes since November 2021.

The BCRD assessed that previous hikes—which brought the policy rate into contractionary territory—and the government’s battery of subsidies have succeeded in keeping inflation under control. Both headline and core inflation continued to moderate through January from their respective April and May 2022 peaks. With the policy rate at its current level, the Bank expects inflation to return to its 3.0–5.0% target band sometime this year. Lastly, with regards to activity, the Bank forecasts “very moderate” growth for Q1 2023, which further supported its decision to hold fire.

The BCRD did not provide hints on future policy moves in its communiqué. If inflation continues to moderate, it is likely that the Bank will not increase rates further. Virtually all of our panelists expect the Bank to cut the policy rate later this year, although the discrepancy among analysts is wide, with end-2023 policy rate projections ranging from 8.50% to 6.50%. The BCRD is expected to hold another policy meeting at the end of March.