Dominican Republic: Central Bank continues tightening cycle in September
The Central Bank of the Dominican Republic (BCRD) raised its policy rate by 25 basis points to 8.25% at its meeting on 30 September. The BCRD’s decision, which markets had priced in, marked the ninth hike since November 2021—totaling 475 basis points.
As justification for its ongoing tightening cycle, the Bank again cited elevated inflation due to higher prices for raw materials, fuel and transportation. Moreover, external headwinds have worsened: Second-round effects have continued to stoke inflationary pressures. Nonetheless, as expected in previous meetings, inflation continued trending downward in August, registering its lowest level since January. The Bank now expects inflation to reach its 3.0–5.0% target range by mid-2023. Meanwhile, the domestic economy’s performance further sustained the BCRD’s decision: Due to a strong economic activity figure through the first eight months of the year, the Bank revised its growth estimate for 2022 upwards to 5.0–5.5%.
In its communiqué, the Bank repeated its statement that it would “continuously [monitor] global financial conditions and economic agents’ expectations, in order to take the necessary measures to maintain price stability.” Nonetheless, it gave little insight as to future movements. Our panelists expect the Bank to raise the main rate before the end of 2022.