Dominican Republic: Central Bank of the Dominican Republic decreases rates in August
Latest bank decision: At its meeting on 29 August, the Central Bank of the Dominican Republic (BCRD) decided to reduce its monetary policy interest rate by 25 basis points to 6.75%, and the permanent-liquidity-expansion-facility and remunerated-deposit rates to 7.25% and 5.25%, respectively. This decision brought overall rate cuts to 175 basis points since May 2023.
Monetary policy drivers: The key domestic factors influencing the BCRD’s decision included expectations of looser global monetary conditions, coupled with the strong performance of the Dominican economy and a gradual moderation in private credit growth. In addition, the BCRD noted that inflation has remained at the lower end of the target range of the 3.0–5.0% target range so far this year, with July’s inflation coming in at 3.5% and core inflation dipping to 3.9% in the same month.
Policy outlook: The BCRD did not provide explicit forward guidance. Our panelists unanimously expect additional rate cuts by end-2024, with the Consensus being for about 75 basis points of reductions. That said, forecasts are spread relatively wide, ranging between 25 and 175 basis points. The pace and timing of the U.S. Fed’s monetary policy loosening cycle is a critical factor to consider, as the BCRD aims to maintain its interest rate differential with the U.S. to maintain exchange rate stability.
The Bank is expected to reconvene in late September.