Dominican Republic: Central Bank pauses tightening cycle in April
At its 29 April meeting, the Central Bank of the Dominican Republic (BCRD) decided to leave its policy rate at 5.50%, in line with analysts’ expectations.
The decision came despite inflation and inflation expectations continuing to soar further above the BCRD’s target in March and April respectively, with recent events in the global economy—notably the war in Ukraine and Covid-19 lockdowns in China—stoking price pressures.
Meanwhile, economic activity remained robust in March, accelerating to 6.4% (February: 5.8%) largely driven by a resurgent tourism sector, coupled with contributions from the construction, commerce and transportation sectors. That said, the Bank said that it expects inflation to gradually converge to its 3–5% target band, aided by government measures to combat price pressures and by the stability of the exchange rate. Thus, the Bank felt it had grounds to take a wait-and-see approach.
In its latest release, the BCRD considered that the economy was firm enough to handle external shocks, but said it “reaffirms its commitment to conduct monetary policy towards the achievement of its inflation target and […] will continue to monitor the international situation and inflationary pressures, with the purpose of adopting additional measures in the face of factors that could pose risks to price stability”. Thus, the Bank hinted at continued policy normalization going forward if elevated price pressures persist.