Dominican Republic

Dominican Republic Monetary Policy July 2024

Dominican Republic: Central Bank leaves rates unchanged in July

At its meeting on 31 July, the Central Bank of the Dominican Republic (BCRD) kept its monetary policy interest rate (TPM) at 7.00%, while also maintaining the permanent liquidity expansion facility rate (1-day Repos) at 7.50% and the remunerated deposit rate (Overnight) at 5.50%.

The key domestic factor influencing the BCRD’s decision on interest rates was the recent performance of inflation, which fell significantly to 3.5% in June 2024, staying within the target range of 3.0–5.0%. This was attributed to the monetary and fiscal policies implemented over the last year. The Bank also noted that the current monetary policy stance will keep inflation within the target range for the current year. Additionally, the strong performance of the Dominican economy and the growth of private credit were considered.

The BCRD did not provide explicit forward guidance, but it reiterated that it will continue to monitor macroeconomic developments with the aim of adopting timely measures necessary to preserve macroeconomic stability and ensure that inflation remains within the target range. Our panelists unanimously continue to expect that the BCRD will cut interest rates from current levels by end-2024, with the Consensus being for about 100 basis points of reductions. That said, forecasts are spread relatively wide, ranging between 25 and 200 basis points. The pace and timing of the U.S. Fed’s monetary policy loosening cycle is a critical factor to consider, since it will likely pave the way for rate cuts in the Dominican Republic, as the BCRD aims to maintain its interest rate differential with the U.S.

The Bank is expected to reconvene in late August.

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